Do We Really Need to Raise the Debt Ceiling?

The American Thinker ^ | April 16, 2011 | Jude Federspiel

[Scanian]

In the last week I've read at least four syndicated columns which contained the following argument: were the Congress to resist raising the debt "ceiling," the full faith and credit of the United States Government would be endangered. The financial system would inevitably crash; investors would send their capital to other safer, more stable havens; depression would follow. Since I am an inveterate skeptic, I feel we must investigate this calamitous premise a bit before accepting the conclusion that the debt "ceiling" must be raised.

To predict the outcome of not raising the debt "ceiling," let's model the nation's current economic morass, and try to predict the outcome. For our study we will consider an American household, since that is a financial model most of us can comprehend.

Let's say the household has two working adults and two children, a home with a mortgage, two cars with one car loan, and some credit cards. Their debt (between the mortgage and the car loan and credit cards) is very high compared to their income, and their "nondiscretionary" expenses such as food, and utility bills cannot be easily reduced. They have another expenditure category which we will describe as "discretionary," comprised of clothing, entertainment, eating out, pursuing hobbies, vacations, gifts, and other non-mandatory expenses. In order to pay their expenses each year, they pay more and more of their total outlays via credit card, because they spend annually approximately 40% more money than they earn. Despite making their payments on time, they cannot pay off any of the credit cards and in fact the principal increases steadily. Each year they have an annual budgeting meeting where Mom and Dad debate contacting their credit card companies and requesting a credit limit increase. They acknowledge they should spend less, but they don't know how...

[dalight]

Unfortunately, if the Debt Ceiling is raised the Fed is just going to print more money. This is the only thing they can do because no one has $100 Billion per month to loan them once they proved they couldn't be trusted to defend the value of the currency.

Just like this writer's analogy, our credit card is maxed out. The bank can't be told to relent and let you get deeper, but Congress can be beaten into allowing these people to make this situation even worse if they ok more borrowing without massive immediate cuts that make the current debt ceiling a real ceiling and not another floor. This means 1/2 Billion in permanent cuts to current spending this year for each Billion Borrowed until the debt ceiling is restored.

CRB Index for the last 6 months.. (Future Freepers Sorry, this is a snapshot URL) this post won't make sense a month after the current date.)

This exactly matches the chart presented by Russ Winter at Minyanville.

The last 40 years have nothing to do with the current situation because folks had the good sense to go Ape Sh%$t when Nixon gave up the Gold Standard. What they are doing now.. the BASELESS STANDARD, the NOT EVEN GREEN ANYMORE.. standard.. heck.. it isn't even paper. Just electrons representing lies that our children have to make real by living in bondage.

If the Debt Ceiling is increased, the Fed will do QE3 to keep Treasury auctions from failing. Something immediate and substantial needs to be done, and Congress just punted.

Some say, "If interest rates on Treasuries skyrocket then everyone, including China and Saudi will jump back into dollars with wild abandon." But, more likely, there will be no takers for $100 Billion per month.. but the interest rates may rise anyway.. rather... it is much more likely that QE3 occurs for the same reasons as QE2 but the situation is more desperate.

The problem with that.. is that the US is deep into short term borrowing which means that the Deficit will balloon insanely the minute interest rates begin to rise..

You get into a trap, there is no interest rate high enough that overcomes the real likelihood of loss of the original principle. Equity works because it based on the analysis of the risk vs reward of appreciation or loss of the capital investment. Bond work on the assurance that the capital invested is safe, over a certain level of risk, they are considered junk because they are inherently not safe.

What foreign companies will do is use the fake dollars we have given them to purchase real US assets leaving us in an inflationary spiral and vassals in our own land. They will at some point soon, months, insist that all of our borrowing be done in their currency rather than ours and this is when our goose is cooked.

This is a story as old as Joseph, the Pharaoh and the 7 years of famine. It ended with all of Egypt in Slavery including the Israelites whom only God could save.

What is sick is that Beck warned of this 6 months ago and we just couldn't see it back then.. but now it is obvious.. and yet we are not doing anything to stop it.

There comes a point in every PONZIE scheme where the new members cannot sustain the deal and it all comes tumbling down. Social Security is the Ponzie scheme and we all know it. It has failed we are selling our very lives and putting our children into the fire of slavery and death and oppression. This has to end worse than Greece and Obama and crowd know it and are cheering with the torches in their hands. This is the Cloward-Pevin crisis they have been working for, but we don't have to go there.

First and foremost, people have been lied to and they are not ready for dealing with the reality of this. Beck and Palin see Trump's big mouth as a distraction but people are sick of lies. I am.

It starts here first. We quit lying to ourselves. I saw the charts that I posted here this weekend and they made me sick. The guy at www.endofamerica93.com has seen this for a while.. and unfortunately decided to make this a sales pitch with a 20 minute clouded presentation at the beginning.

The crisis doesn't come from "Bankruptcy" as Hannity keeps saying.. but the loss of "Reserve Currency Status" and the meetings are going on around the world to get this accomplished. I am sure they would like to do this without destroying the value of the dollars they already have.. but QE3 will destroy this value anyway.. so after June 2011, a crisis is assured soon no matter what if the DEBT CEILING IS INCREASED without substantial immediate and draconian cutting and a mechanism to absolutely end the deficit borrowing in 24 months.

Go outside, look around, do we love this country? If we do, we have only about 2 months to do something.

[Cringing Negativism Network]

REDUCE the debt ceiling.

Enough is enough.

[dalight]

REDUCE the debt ceiling.

How do you propose to get that to happen? Ideas? The Overton window is just starting to move to where folks are starting to understand the magnitude and nature of the crisis that the Fed is creating. We will have to see just where we get to before folks wake up enough to act like adults.

[allmost]

Japan may no longer be able to buy our debt at current levels for obvious reasons. The EU is balancing it’s own house of cards right now. China has been gearing up for, and politically needs, a War for domestic reasons IMO. It wont be our choice when the Dollar decouples from it’s global status. When the rest of the world gets fed up, We the People are screwed.

[trebb]

Either way, we’re screwed. It’s jus a matter of when we become aware that we’re walking stooped over, and in excruciating pain, because of the object protruding from our butts.

[dalight]

It wont be our choice when the Dollar decouples from it’s global status. When the rest of the world gets fed up, We the People are screwed.

This would never be our choice. It isn't sane or rational. But, it is coming if we can't hold the line on the Debt Ceiling in a way that prohibits forever QE3.

[ez]

In the example given, if Mom and Dad do not raise their credit limit, their credit will not be destroyed...they will simply have to STOP SPENDING.

[ez]

If its coming anyway, DON’T raise the debt ceiling and maybe people will realize this is not a game.

[PGalt]

Lower the spending floor. Defund all of the collectivist’s collectives. Then, never let them into the political arena again. We will prosper and flourish.

[Georgia Girl 2]

We are all going to have to face the House of Pain at some point. I would rather just get it over with now and move on. If we had just faced the collapse in 2008 instead of passing TARP we would be coming out of it now. Bernanke knows full well a total financial collapse is coming. His only option as he sees it is to try to drag things out for as long as possible but eventually it will happen.

[stockpirate]

I am sick of our country, both parties are full of socialists.

America is getting the leadership we deserve.

[MontaniSemperLiberi]

No. We do not have to.

We can roll over the debt by exchanging mature bonds for new bonds.

Kind of like making the minimum interest payments on a credit card that has been maxed out.

It will mean a +40% reduction in government spending with most of the reduction coming from SS, Medicare and/or Defense.

[MontaniSemperLiberi]

“If we had just faced the collapse in 2008 instead of passing TARP we would be coming out of it now.”

Truth.

[JustaDumbBlonde]

Jeez ...

[Scanian]

“I am sick of our country, both parties are full of socialists.”

I made a little wager with an Irishman yesterday that American citizens will start to emigrate during the next 10 years due to being fed up with galloping socialism.

[stockpirate]

My hope is a few states invoke the 10th amendment and we move there