July 27, 2011

What Happens on August 2nd?

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Here’s the latest from the Wall Street Journal on how Main Street is reacting to the debt ceiling stalemate:

In a recent survey by the Association of Financial Professionals, which represents treasury and finance executives, half of the 305 respondents said failure to reach an agreement by the Aug. 2 deadline would have a detrimental impact on their access to capital and short-term investment strategies.

Half of the respondents planned to take defensive actions, such as a freeze on hiring, reducing capital spending and drawing on credit lines to build cash, the AFP said….A quarter of the companies surveyed that hold U.S. Treasury securities said they would sell at least some of them if Congress and the White House failed to reach a deal.

….Corporations are worried about a default because the consequences for the financial system are unknown. Treasurys serve as the basis for companies’ borrowing costs, are key holdings for banks and money-market funds and are used as collateral in short-term lending markets.

I’m still flummoxed about this. If we run out of money, the federal government will stop paying some of its bills. That’s bad, and it will quite likely have a negative effect on the economy. Corporations are right to be apprehensive about this.

But that’s all that will happen. Treasury bonds will continue to roll over and interest payments will continue to be made. That means there’s no reason to sell Treasurys; no reason they can’t continue to be used as collateral; no reason that access to capital should dry up; and no reason that companies will need more cash.1

At least, that’s how it seems to me. What am I missing here? I feel like I must be an idiot or something. Is the answer something so obvious that no one ever mentions it, or something so arcane that it never gets explained in lay terms? Or is everyone else crazy? Or what?

1And, by the way, no tangible reason that ratings agencies should downgrade U.S. debt. We’re going though a political dispute, not a crisis that impairs our ability to service our debt.

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WE CAME UP SHORT.

We just wrapped up a shorter-than-normal, urgent-as-ever fundraising drive and we came up about $45,000 short of our $300,000 goal.

That means we're going to have upwards of $350,000, maybe more, to raise in online donations between now and June 30, when our fiscal year ends and we have to get to break-even. And even though there's zero cushion to miss the mark, we won't be all that in your face about our fundraising again until June.

So we urgently need this specific ask, what you're reading right now, to start bringing in more donations than it ever has. The reality, for these next few months and next few years, is that we have to start finding ways to grow our online supporter base in a big way—and we're optimistic we can keep making real headway by being real with you about this.

Because the bottom line: Corporations and powerful people with deep pockets will never sustain the type of journalism Mother Jones exists to do. The only investors who won’t let independent, investigative journalism down are the people who actually care about its future—you.

And we hope you might consider pitching in before moving on to whatever it is you're about to do next. We really need to see if we'll be able to raise more with this real estate on a daily basis than we have been, so we're hoping to see a promising start.

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