Geitner says possibility of default

http://www.treasury.gov/connect/blog/Pages/letter.aspx

Is he bluffing?  Or are we closer to a collapse than we know?  

Secretary Geithner Sends Debt Limit Letter to Congress

Erika Gudmundson

1/6/2011

Today, Secretary Geithner sent the following letter to Congress regarding the debt limit :

January 6, 2011

The Honorable Harry ReidMajority LeaderUnited States SenateWashington, DC  20510

Dear Mr. Leader:

I am writing in response to your request for an estimate by the Treasury Department of when the statutory debt limit will be reached, and for a description of the consequences of default by the United States.

Never in our history has Congress failed to increase the debt limit when necessary. Failure to raise the limit would precipitate a default by the United States.  Default would effectively impose a significant and long-lasting tax on all Americans and all American businesses and could lead to the loss of millions of American jobs.  Even a very short-term or limited default would have catastrophic economic consequences that would last for decades.  Failure to increase the limit would be deeply irresponsible.  For these reasons, I am requesting that Congress act to increase the limit early this year, well before the threat of default becomes imminent..........

 Treasury would prefer not to have to engage again in any of these extraordinary measures.  If we are forced to do so again, these measures could delay the date by which the limit is reached by several weeks. Once these steps have been taken, no remaining legal and prudent measures would be available to create additional headroom under the debt limit, and the United States would begin to default on its obligations........

Sincerely, 

Timothy F. Geithner