Bill Tatro

As the high drama continues to intensify in Washington, D.C., my confusion also continues to increase. According to the Treasury Department (a reminder to all that Tim Geithner is no longer at the helm — what a shame — and the new guy has been conspicuously absent) the borrowing limit will be reached a little later this month, on October 17th. But the real problem would be reached on October 31st, as all the Treasury Department tricks will have been exhausted. This I fully understand, these are merely expiration dates. So, at this point, when October 31st ultimately arrives, the Treasury supposedly won’t have enough money to pay its debts, and therefore, according to Barack, Harry, Nancy, and even John (that’s Boehner and McCain), the government will default on its debt. Not having money is a major problem, this I also fully understand.

However, according to a recent analysis performed by the co-Chief of FICC Research at Barclays, the total interest due during the October 17th to October 31st time period is approximately $6 billion. The average citizen might ask, “What about the principal payments for treasury bills, notes, and bonds coming due during the same time period?” That’s a very good question. The answer is that the Treasury Department will do what they have always done, namely conduct a refunding auction. In other words, they’ll simply rollover debt that’s coming due. Thus, the only concern is not principal, it’s interest to the tune of $6 billion. Nevertheless, it would be a real concern for me, if from the October 17th to the 31st time period; the Treasury Department only took in $3 billion or $4 billion. A default under that scenario would be quite obvious to the prior cast of abovementioned characters and even myself.

My bewilderment results from the fact, that according to Barclays, the Treasury will collect $100 billion in that 17th to 31st time period — that’s $94 billion more than they need to pay our debts. Consequently, it would seem quite logical to me to take the word “default” off the table by simply announcing that the first $6 billion that’s collected will be paid on our interest. After that, we’ll go back to the drawing board regarding everything else.

Bill Tatro

Along with his 40-years of dedication in the financial services industry, Bill is the President and CEO of GPSforLife, has recently authored a highly successful book entitled 44th: A Presidential Conspiracy, publishes his dynamic monthly financial newsletter MacroProfit, and faithfully continues his third decade on the radio with It’s All About Money, which can be heard weekdays on Money Radio in Phoenix and in podcast form on his website (and on smartphone apps) published at weekdays at 5pm Eastern. Bill can be reached via email at and on Twitter @tatroshow.