There's a key decision looming for the Congress - to raise the debt ceiling or not to raise? A key decision not in terms of the outcome (because everyone knows what will happen) but one in terms of charting the US' future path.
The debt ceiling is like the borrowing limit on your credit card. The current US public debt ceiling is at $ 14.3 trillion, the total public debt was $ 14.1 trillion at the end of January. At the current rate of debt growth ($4B per day), the US will hit the ceiling in April. In all likelihood, the ceiling would be increased by another trillion (or 2 trillion), and life would be normal again until the next time. Just to give you some perspective: In 2001, the US debt ceiling was at $5.95 trillion. Since June 2002, the ceiling has been raised no less than 10 times to its current lofty peak of $14.3 trillion. I wish all credit cards would work this way. Every time your cards are maxed out and you can't pay your bills, your borrowing limit is magically increased. You spend more, never pay and voila, it happens again!
Big Ben and his boys want to 'print their way' out of the current situation the US is in. What is their plan?! Print money, increase money supply and pray the economy turns around enough and generates enough income growth (GDP) to pay the existing debt. By maintaining the interest rates close to zero, they are trying to ensure that the interest on current debt does not spiral to unmanageable levels. However, by trying to keep the debt under control, this current monetary policy will only increase inflation, which already exists and is increasing all the time. Given the current rate of GDP growth the economy will soon enter a vicious period of inflation and will ultimately collapse.
By some unexpected stroke of sanity should Congress decide against raising the debt ceiling, pray what might happen? I don't have a crystal ball but it doesn't require a genius to predict that the US will default on its debt - the stock market and the bond market would collapse dissolving everybody's 401K/retirement savings, the dollar would plummet and foreign banks, countries and other lenders would be forced to write-off a portion of $14 trillion in expected future payments.
People worried what could happen to Europe if Greece defaulted - and Greece had a GDP of $350 Billion. What will happen if the US defaulted? Go figure!
The debt ceiling is like the borrowing limit on your credit card. The current US public debt ceiling is at $ 14.3 trillion, the total public debt was $ 14.1 trillion at the end of January. At the current rate of debt growth ($4B per day), the US will hit the ceiling in April. In all likelihood, the ceiling would be increased by another trillion (or 2 trillion), and life would be normal again until the next time. Just to give you some perspective: In 2001, the US debt ceiling was at $5.95 trillion. Since June 2002, the ceiling has been raised no less than 10 times to its current lofty peak of $14.3 trillion. I wish all credit cards would work this way. Every time your cards are maxed out and you can't pay your bills, your borrowing limit is magically increased. You spend more, never pay and voila, it happens again!
Big Ben and his boys want to 'print their way' out of the current situation the US is in. What is their plan?! Print money, increase money supply and pray the economy turns around enough and generates enough income growth (GDP) to pay the existing debt. By maintaining the interest rates close to zero, they are trying to ensure that the interest on current debt does not spiral to unmanageable levels. However, by trying to keep the debt under control, this current monetary policy will only increase inflation, which already exists and is increasing all the time. Given the current rate of GDP growth the economy will soon enter a vicious period of inflation and will ultimately collapse.
By some unexpected stroke of sanity should Congress decide against raising the debt ceiling, pray what might happen? I don't have a crystal ball but it doesn't require a genius to predict that the US will default on its debt - the stock market and the bond market would collapse dissolving everybody's 401K/retirement savings, the dollar would plummet and foreign banks, countries and other lenders would be forced to write-off a portion of $14 trillion in expected future payments.
People worried what could happen to Europe if Greece defaulted - and Greece had a GDP of $350 Billion. What will happen if the US defaulted? Go figure!
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