President Obama has repeatedly referred to the need to protect the full faith and credit of the United States. While the Administration has previously said that Obama doesn't interpret the full faith and credit clause of the Constitution to allow him to unilaterally raise the debt ceiling, I would note that everything that Obama says has an expiration date--remember that this is the same person that, as Senator, opposed raising the national debt limit and expansion of government surveillance, and when selling ObamaCare, said it would lower premiums, no one would lose their jobs, and everyone would be able to keep their plans and doctors.
Now China and Japan has expressed their concerns about the debt ceiling debate. From Asia News:
The budget stalemate in the United States and the failure to increase the debt ceiling, which pit President Barack Obama and Republican hardliners, are rattling Beijing, irritating the upper echelons of the Chinese government.
The world's largest holder of US treasury bonds wants Washington to secure its investments. Japan shares China's concerns. Together, the two Asian nations hold more than US$ 2.4 trillion in US securities and fear destabilisation of world markets.
Moreover, for many governments and investors the stalemate over the debt ceiling is far more problematic than the current shutdown of US federal agencies, following the failure of Congress to reach an agreement on the new budget.
"As the world's largest economy and the issuer of the major reserve currency in the world, it is important for the US to maintain the creditworthiness of its Treasury bonds," Deputy Finance Minister Zhu Guangyao said yesterday in a tough warning.There are some interesting points or implications about Guangyao's comments. Not raising the debt limit doesn't mean that the U.S. will default on funds it has already borrowed--only that it won't be able to borrow any more. China is obviously concerned that the U.S. won't borrow more. Why? I would suggest that China's finances require it to dump its money somewhere to assist in keeping its currency artificially devalued, and it has an interest in preventing a worsening U.S. economy now--it has to sell products somewhere, at least for now.
Second, the warning about reserve currency is interesting because, in the past, the Chinese government has been working at trying to replace the Dollar as a reserve currency. This suggests that, notwithstanding its effort, there is currently no other currency ready to step into the reserve status.
Third, Guangyao's comments play into the hands of the Democrats and RINOs, giving them an excuse to either try and force an increase in the debt limit, or accede to the President acting unilaterally.