CNN this week was running a clock showing how many hours were left until the United States defaulted on its debt, an event heralded as something that would make the biggest collapse of our times, that of Lehman Brothers, look like small potatoes.
My interest is more than academic: I have skin in the game.
Let me explain. I don't actually have direct skin exposed, but the Reserve Bank keeps a goodly portion of its foreign exchange reserves in United States treasuries.
Since our reserves are a national asset, I have at least a notional portion of this at risk.
What would a default by the US government on its $16-trillion debt mean?
For context, remember that the Lehman collapse, which froze financial markets worldwide and led to the loss of trillions of dollars of market value, not to mention horrendous job losses, was for the relatively paltry sum of $517-billion.
The real difference
But here's the real difference. In the Lehman case, the US treasury was able to come to the rescue with $700-billion in emergency funds to prop up the banking system.
Then Ben Bernanke turned on the taps at the Federal Reserve to ensure the banks got as much cheap money as they needed.
This time there will be no US treasury to fund a bailout. It will need the bailout.
And the Fed has done so much printing that it now owns $3.6-trillion in debt itself. By all accounts, it wants to slow down the printing, not to start a fresh round.
So what do we do in the event of the US doing a Lehman? Do we have a whip-round and get countries to send it cash to mount another troubled asset relief programme-style rescue (of itself)?
Come to think of it, we have already. The world collectively has $16-trillion at risk in this asset.
Harsher "bankruptcy"
But "default" is a sensitive word. I see the Chinese, who have masses of skin exposed, prefer the harsher and more apt "bankruptcy".
Could this really be so? Could the world's greatest power be hours from bankruptcy, and just what would be the effects of such a potentially calamitous event be?
Bloomberg reported on Wednesday that $120-billion of treasury bills would fall due on Thursday and investors were increasingly worried they would not get paid.
As this column went to press ahead of the deadline, it appeared likely that the Democrats and Republicans would stitch together a last-gasp deal, but it would be no more than delaying the standoff by a few months. This is much likened to kicking a can down the road, but the analogy doesn't work.
Cans do not grow in size, while the US debt, which was $14.3-trillion when they hit the last ceiling in 2011, has since grown to $16-trillion.
The Chinese, you would think, would have no truck with this. But they have upped their holdings from $900-billion in 2011 to $1.3-trillion now.
A bigger creditor
By way of explanation, the one way the Chinese are able to keep the renminbi competitively priced is by using a chunk of it to buy dollars and, by extension, US treasuries.
But the fact that the Chinese and US are joined at the hip in this story is well known.
Less appreciated is that there is a bigger creditor: the Federal Reserve — which is owed $2.07-trillion as a result of its aggressive programme of buying US debt under the rubric of quantitative easing but in plain English monetising long-term debt held by banks by paying them in cash for it.
You have to wonder that, if the programme continued long enough, as did the bashing of heads between Republicans and Democrats, that the Fed would ultimately hold all of this debt. The US would be in debt … to the US.
The president and chairperson of the Fed could, over lunch perhaps, agree that it is silly for one arm of the state to owe another arm so much money and agree to write it off, so we could all start over again.