Debt limit default, more hype than reality.

 DEFAULT IS NOT CONNECTED TO THE DEBT LIMIT

JUST MORE POLITICAL MANEUVERING BY THOSE WHO ADVOCATE UNLIMITED SPENDING

It is true that the debt limit seems to be reached at an ever shorter interval, that is because spending is accelerating over revenues. The spenders would like if the debt limit was eliminated, so that they could spend without any restraint at all. The fact is that there are very few in Washington that have any interest in restraining spending and debt. If any attempt to even slow the rate of debt increase are initiated, we hear the the Republicans are going to cut Social Security and Medicare or some other social program that will create an emotional response. Now of course we hear the cries that if the debt limit is not immediately raised or eliminated the government will be forced to default on its debt.

For there to be default it would mean that the government would not honor Treasury or savings bonds that are mature and need to be paid. There is plenty of revenue that could be repurposed to pay these obligations, it would just mean that some other spending would need to be postponed or the federal reserve would need to do some more creative financing like quantitative easing to repay this debt.and saving.

Eventually the Federal government is destined to default on its debt, because it is already more than they can ever repay. This is why many foreign debt holders are considering or are already liquidating their U.S. debt, since treasuries are in the 4% range and inflation or deficit spending is over 6%. Objective analysis of the U.S. economic situation tells them it is time to move away from dollar investments. Domestically, we are continually reassured that all is well, we are strong and in great economic shape.

Debt service last year was $383 billion, this is 12 % of federal spending. Spending last year was $6.27 trillion, Revenue was $4.9 trillion a deficit of $ 1.37 trillion. That means that debt increased last year by $1.37 trillion. To sell this debt requires higher interest rates which means more of the revenue needs to be spent on paying interest on this debt. How long could you maintain this policy in your household?

The Federal Reserve has been buying this debt with book entries, just to keep the interest down, this is called quantitative easing, which is a fancy word for fraud. These practices just lower the purchasing power of the dollar, which is why food, energy and other items take more dollars to buy the same goods.

As foreign purchasers of U.S. debt move to other currencies they will in effect sell off U.S. debt, they are viewing it as a risky investment because it is losing its purchasing power. Our Treasury secretary recently stated that inflation is not caused by deficit spending. A giant whopper of a lie that will not be accepted by savy debt purchasers. As the market for this debt contracts, it will take higher interest to entice buyers. This will add to the cost of servicing this debt and increase the deficit or require massive new taxes or massive cuts to spending, both which will cut economic growth and will lead to a severe slowdown. It is true you cannot spend more than you make indefinitely.

So, back to the debt limit debate. If we had responsible politicians who had the best long term interest of the country in mind they would be debating how to solve this problem and avoid economic catastrophe. What we see is just maneuvering for political gain and no effort to solve the problem. Efforts to raise military spending by another $500 billion and more global warming pending all so that donors will have a steady flow of government money.

I expect no effort to solve this problem, but when it all comes crashing down, they will have a solution that you as a citizen will be paying for by the loss of your assets and income.