A Narrow View from Israel: US Debt Ceiling


I have to admit – until a friend brought it to my notice, I totally missed the dramas of the US Debt Ceiling furor. And the possible effect it could have on US citizens living in Israel, many of whom rely on their US Social Security checks...

From over here in Israel, local housing availability & prices, and the increasing costs of staples (the infamous cottage cheese scandal), seem to have blocked any view to the US financial woes potentially on the short term horizon.

As I now understand it (tell me if I'm wrong) the US is now facing the eventuality of defaulting on its debt payments, by hitting the "debt ceiling" laid down by Congress.

The Government has revealed the specter of being unable to meet its Social Security payment obligations, in the coming days. It would seem that Obama may be required to simply stop the checks going out on 3rd August, leaving some 70 million US householders without disability, unemployment and pension payments (to name a few).

Meantime, the dollar is falling, and the markets are rumoured to be nervous at the prospect of the US being downgraded from it's AAA credentials.

From my humble corner in Israel, the US doesn't look like a Greece, Iceland or Ireland scenario. From AAA to merely AA, does not a basket case make.

The US remains the world's richest and most advanced economy, by far.

Furthermore, the prospect that the administration will pull the plug on the Social Security payments, looks like a wild-card threat, in the nail-biting poker game between the Democratic administration and the Republicans.

If cash flow is indeed the problem, it could be reasonable to delay the payments of these obligations, but it would be outrageous to cancel them. The prospect of provoking Cairo-type social upheaval by 70 million US householders, doesn't bare consideration.  

Even for the most pessimistic, those dire predictors of doom, if the US does indeed default on 3rd August, along the lines feared in Greece, with the whole ship going bottom-up, then your pension payment check will be the least of ALL of our problems.

So, before US citizens in Israel enter panic mode about their US benefits (which they still receive as ex-pats) they should take a cold shower, and enjoy the summer.

My bet is, your check will be in the mail.

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