Thursday, October 24, 2013
America accomplished nothing with regard to the debt ceiling. America simply raised the debt ceiling, which only takes a couple of clicks on the Treasury’s computer.
To put the debt ceiling debacle into perspective it’s equivalent to a family getting together and deciding to buy a new car, new furniture and new iPhones for everyone.
In a few months the family members realize they can’t pay the bills so they run down to their local bank and tell the bank that the family got together a few months ago and decided to buy a bunch of junk and now they can’t pay all their bills.
They want to maintain their high credit rating and since the family already bought all the junk, they demand that the bank raise the family’s borrowing limit so the family can meet all the current financial obligations.
The bank raises the family’s debt limit, and the family borrows more money and pays its bills only to buy more junk, and at some point down the line, ask for another debt limit increase.
Again, America accomplished nothing by raising the debt ceiling except to allow a few more trillions of dollars of debt to be put on the backs of future taxpayers, you know, those young people who everyone claims to care so much about.
It’s impossible to predict when, but at some point, the U.S. government bond market is not going to take these constant increases in the debt ceiling with no fiscal reform so lightly.