Tempest in a Teacup?

teacup
Elephants and donkeys play chicken. Sequestration and the shutdown are a vice squeezing D.C. It’s terrible, but what hasn’t been written about this stuff?

How about the knock-on effect on liquidity and interest rates? Uncle Sam just got through the spending binge that is Federal year end. Companies booked revenue – and reported it to Wall Street. But agencies can’t process payments because they’re shut. That means a cash squeeze for corporate America – talk about collateral damage. Consider most tech companies generate 15-20 percent of their revenue from Feds.

Let’s focus locally. Resellers are in a bind. Their agreements with tech companies commit them to deliver revenue in 30 or 45 days. But, they’re not getting paid by the Feds. Is a day or even a week delay in processing payment a big deal? Yes, if you’re bridging $50 million in orders from last week – and operating on a three-percent margin. Resellers are torn between partners and customers. We’ll likely see a thinning of the herd. Smart ISVs and OEMs will find a way to provide relief for their valued partners.

Now consider the payment impact for direct suppliers outside of IT – what if you sold a $1 billion weapons system last week?

This mess is hurting everybody, and it will only get worse if left unresolved. The credit crunch – and its knock-on impact for Wall Street and our economy – will throw more than a pinch of salt in our economic wounds. If this drags on past October 18, when the U.S. will run out of cash without a rise in the debt limit, we will have the elements in place for a perfect storm. Watch for the price of borrowing to rise – that’ll move against fiscal easing. Pennsylvania Avenue sabotages Main Street. That’s how a tempest in a tea cup can become a tsunami.
Steve O'Keeffe
About Steve O'Keeffe
Steve O'Keeffe is the founder of MeriTalk, the government IT network. MeriTalk is an online community that hosts professional networking, thought leadership, and focused events to drive the government IT dialogue. A 20-year veteran of the government IT community, O'Keeffe has worked in government and industry. In addition to MeriTalk, he founded Mobile Work Exchange, GovMark Council, and O’Keeffe & Company.
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