Contrary to calculations performed by Barclays and other analysts (including Stone McCarthy first presented on Zero Hedge), which speculated that the Treasury would have enough cash to last it through August 15th due to an increase in tax receipt, the White House's press secretary Jay Carney said that the Treasury will be "running on fumes" if the debt ceiling is not raised by August 2, naturally adding the traditional doomsday phrase that it is a "crisis situation." He had also added previously that tax revenues are not coming at an accelerated pace and that the cash will not last longer than Tim Geithner's original forecast of August 2. As the chart below shows the Treasury had $75 billion in cash as of last night, and will raise another $55 billion in net cash over upon settlement of this week's auctions. In other words, Geithner now predicts that the pro forma cash of $130 billion will last the US just one week. Well, at least we can see what the source of all the problems is.
From Reuters:
White House press secretary Jay Carney said that at midnight on August 2 the country will lose its authority to borrow for the first time, meaning there is no alternative for Democrats and Republicans other than to compromise over a deal to reduce the deficit and lift the debt ceiling.
"People keep paying their taxes. Revenue comes in. Money comes in. The problem is there is not enough money because we can no longer borrow money to pay all our bills. You're basically running on fumes," Carney told reporters. "It is a crisis situation."
Rating agencies warn they could downgrade the top-notch U.S. AAA credit rating if the United States misses debt payments or if it fails to take significant steps toward controlling the long-term budget deficit.
Carney said that if there is no deal by August 2, the failure of Congress to have acted would send shock waves through financial markets. "There will be assessments made by investors around the globe about what the heck is happening in Washington," he said.
We will present an updated cash burn analysts from Stone McCarthy as soon as one is available, probably in the next 2 hours.
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