Why Even Pretend There’s A Debt Ceiling Limit?

 

Why Even Pretend There's A Debt Ceiling Limit?

 

Written by Dave Kranzler

 

 

 

The current “debt ceiling” has been suspended until March 2019. The current amount of Treasury debt outstanding is $20.681 trillion. It has been estimated that the amount of Treasury outstanding by March 2019 will be as high as $22 trillion. U.S. Government has, for all intents and purposes, operated without a constraint on debt issuance since 2013:

Beginning in 2013, Congress has taken to temporarily suspending the debt limit, rather than raising it directly. The debt limit has now been suspended on five occasions, most recently as part of the Bipartisan Budget Act of 2018, which suspends the debt limit through March 1, 2019. When that suspension expires, the debt limit will be reinstated at a new, higher level. – Bipartisan Policy Center

Note that the estimate of $22 trillion in Treasury debt outstanding by March 2019 is just an estimate from the Committee for a Responsible Federal Budget. But the suspension of the debt ceiling gives the Government carte blanche to spend as much as it wants without restraint. In theory, the amount of Treasury debt could me much higher than $22 trillion by March 2019.

Furthermore, based on the track record of Congress and the President since 2013, the debt ceiling will likely be waived once again. Why even bother playing this game? The Treasury debt doubled under Bush II from $5.7 trillion to $11.2 trillion. Under Obama the debt outstanding nearly doubled again. If this pattern simply repeats, the debt will double again under Trump or under Trump + Trump’s successor after four years.

But it will likely more than double. The cost of interest on the Treasury debt in 2017 was $458 billion. This was 11.5% of the Government’s total expenditures in FY 2017. Already in the first four quarters of FY 2018, the Government has spent $174.8 billion in interest expense – a run-rate of $524.4 billio – 12.8% of the Government’s FY 2018 budget . By the end of FY 2018, the total interest expense will be even higher because the amount of debt outstanding will be have increased over the year by at least $1 trillion and probably more.

The question, then, is why even bother with the debt ceiling? What’s the point of pretending? The debt ceiling was meant to act as a “brake” on the Government’s fiscal recklessness. But now it’s so easy to suspend the ceiling it makes no sense to waste time going through the formality of suspending it. The U.S. is on debt-driven suicide path anyway.

Money that is borrowed behaves exactly like money created (printed) until the borrowed money is repaid and the debt is extinguished. But the Federal Government, for all intents and purposes has not repaid a dime of the amount borrowed for many decades. In effect, in addition to the money that has been printed by the Fed, there is another $20.6 trillion of money that has been created by debt issuance and spent just like actual currency printed.

At some point, this de facto dollar devaluation is going to exert brutal and inexorable downward pressure on the value of the US dollar. Furthermore, at some point, the U.S.’ biggest creditors – like China – are going to say “no mas” to participating in Treasury debt issuance. That’s when the real fun will begin, especially for those long gold and silver.

 

Why Even Pretend There's A Debt Ceiling Limit?

 

Written by Dave Kranzler

 

Check out these other articles by our contributors:

Chris Martenson: Real Gold, Real Silver, Real Wealth - Rory Hall (14/02/2018)

What Changed On September 8, 2017? - Craig Hemke (13/2/2018)

Getting Around Blockchain Geo-Blocking with VPNs - Chris San Filippo (13/02/2018)

Take It To The Bank: Interest Rates Won't Rise - Keith Weiner (12/02/2018)

The Importance Of Gold In 2018 And Beyond - Sprott Money (12/02/2018)

 

 

 

 

 

 

Comments

JIMSJOE2 NickPeeMe Sat, 02/17/2018 - 08:13 Permalink

Clueless , clueless people!

The so called "smart money" around the planet follow the computer models at Armstrong Economics which track both domestic and international capital flows. They forecast back in 2009 that the Dow would move to 22,000 then 23,000 and eventually to 40,000 all due to the capital flight out of Europe as it has been collapsing since 2011 and will continue with capital moving into dollars and US equities which is exactly what we have been seeing and continue to see. The first two targets have bee hit. 2018 is 25.000 then to 28,000 and the first target has already been hit. Now the models are also forecast as we move in the middle of 2018 to 2021 both the Monetary and the Sovereign Debt Crisis hits there along with the pension crisis. The EU, euro, many banks, corporations and countries will not survive and starting in the middle of 2018 the shit hits the fan there. Italy announced they are working on a plan to abandon the euro, another bank there is in trouble, over 50% of all German cities and provinces are flat broke and insolvent due to migrants, mayors across France ask the government for help as they too are all insolvent due to migrants and Spain will run out totally of pension funds in 2018. These are not isolated events but are happening all over the EU as they are all running out of funds. Many banks, corporations and countries have been cut off from capital markets and are being propped up by the ECB but this will not last. This is going to get much worse as we move forward. Now knowing all of this are you really going to park capital anywhere in the EU? Of course not and you are going to move it to dollars and US equities and park capital here and again this is getting ready to accelerate again. Take the current market weakness in equities. This is not a crash nor a collapse but part of an overall correction which was to be expected and is good for markets. There are also several reasons for this and all happening at the same time. First the FED has been desperate to create dollar weakness and to stop the capital flight out of Europe from moving into dollars and US equities. They FED knows that as we move into the middle of 2018 to 2021 the capital flight will increase and cause massive dollar strength again which is not good for the US nor the world economy. The minions , like big banks, have been all saying the dollar is doomed and all markets are overvalued. They have not been significantly successful until one thing happened, the new US tax plan. US multinationals are starting to convert foreign currencies to dollars and most of this will flow into increasing dividends yields and share buybacks eventually moving equities higher. Large domestic firms will also do the same with their tax savings also helping to move equities higher. Now they need a much weaker dollar to do this as they want to make additional profits on the currency conversion. The weaker the dollar the more profits they make. Volkswagen is famous for this as in more than one occasion they made more profits in currency conversion than selling cars. The net has been full of nonsense that the deficit will skyrocket. Really? Tax revenue is up over $85 billion giving individuals and entities more disposable income at the end of January 2018 from the same period last year. The whole plan was about increasing demand and tax revenue from this increased i Individuals and entities now even receive more back on filing taxes and most of this flows into the real economy. . Another thing happening is that bond traders have been pushing up yields in treasuries at the auctions 3 days a week. As the "dumb money" flows out of equities and into bonds, traders will buy equities at the bottom and then create a flash crash in bonds and wipe out most of the dumb money and make huge profits. All of this is exactly what we have been seeing recently! There is an old saying, Follow the money"!

 

In reply to by NickPeeMe

Downtoolong Fri, 02/16/2018 - 07:04 Permalink

The purpose of debt ceiling negotiations is to provide Congress an opportunity to convince us they actually get something done once in a while.

It’s job security.

We’re not supposed to notice how absurd it is. And sadly, most people don’t.

SunRise Fri, 02/16/2018 - 07:15 Permalink

For this debt-issue to improve, the average virtue of the average American has to increase:  They have to be willing to accept personal responsibility ( Is there any other kind ?) for their own well-being, productive-ability, and future.  They have to minimize government and maximize laisse-faire.   If they currently work for the government, then in-mass, they'll need to voluntarily find a productive job instead of a "dole" job like high-brainpower, high-dollar tax accountants and tax CPA's have deciphering 100,000 pages of make-work-rob-others Tax Code.  There are many on the dole driving Porshe's, Mercedes, Volvos, BMW's.  They don't look the part of the down-and-out, because they're among the first to reap the loot from Federal Reserve crediting.  What's next?

JailBanksters Fri, 02/16/2018 - 07:30 Permalink

The Truth ...

To keep the Illusion alive that America doesn't just Print Money out of thin air to pay their Bills when they fall due.

Part of that Illusion is, the Government is not the ones Printing Money into Existence. The trick is to make you believe that the FED has $1,000,000,000,000,000,000,000,000,000,000,000 down in the basement and they just loan it out when ever it's needed.

Here's the other Illusion, that all the other countries knows it's a scam and actively participate in the Ponzi Scheme pretending the scam doesn't exist because there getting something out of it, and their own economy's depend it.

The down side is, it only works as long as other countries continue to pretend it's all real. Which is why Iraq, Syria, Libya, Afghanistan, (Iran), (North Korea), (China), (Russia) were or will be Bombed back to the stone age. It had nothing to do with Terrorists or Terrorism.

 

helloimjohnnycat Umh Fri, 02/16/2018 - 17:45 Permalink

Simply call them what they are : " jew ".

The word jew paints a clear picture that cuts through their altered names, facades, and any titles.

jooz' are behind every financial problem.

Therefore, naming the joo and calling out the joo for his ways & schemes must be hammered into every person's mind.

No joo is innocent.

All jooz have been proven guilty.

Devaluing the USD is not inflating away the debt. No, sir. By design, the debt continues to rise and there has not been one net penny of debt reduced.

All devalution is due to joo thievery.

The joo foxes will continue to steal labors' golden eggs until all joos are eliminated from the roost.

The jooz inflationary schemes slammed across America have created an economic spiral that will eventually become a whirpool.

Millions have already been sucked into the void while others circle the drain.

Day after day the kike media flip-flops economic reports to confuse the masses.

The joo-owned media has done a splendid job of self-serving the joo populace, but the Truth is evident : We've been robbed, enslaved, and instructed there is no way out lest we perish in a severe depression.

If we hung a joo crook every time an anonymous poster opined " hang the politicians from the lamp posts ", within hours, America would be devoid of ALL joo shysters.  Israel would be a barren land.

A sweeping change to America's financial structure must be accomplished and that can only begin by eliminating all communist jooz from all financial decisions.

 

 

In reply to by Umh

hwwesq3 Fri, 02/16/2018 - 07:50 Permalink

If you look at your paper money, it doesn’t say “U.S. Treasury”, it says “Federal Reserve Note”.

If there is no debt ceiling, why borrow and pay interest?  Just print the money with “U.S. Treasury” on it and clear all electronic payments through the Treasury.

Borrowing, when you can just print the money, is wellfare for the rich.

Let it Go Fri, 02/16/2018 - 07:57 Permalink

To the American people, a rising deficit that has yet to yield dire consequences has given us a false sense of security. It is also clear that running up debt is far easier than paying it off. As things stand America continues to rack up a deficit each year of nearly $2,500 for every man woman and child in the country, such deficits were unheard of in the past unless it was during a major war.

The fact is with the artificially low-interest rates of today many people seem to have little desire to cut spending. We are literally gorging on debt, and most Americans seem to think that it is just fine and dandy to wildly run up debt as if there is no tomorrow. More on this topic, and some ugly numbers, in the article below.

 http://Is The Growing National Debt No Longer.A Major Issue? html

BigWillyStyle887 Fri, 02/16/2018 - 08:03 Permalink

They even named it the BIPARTISAN budget act ROFLMAO!

 

Dems and Repubs are so fucking pathetic and everyone can see right through it. Neither of these parties will exist in their current form in 10 years.

Honest Sam Fri, 02/16/2018 - 09:33 Permalink

Because the government must always and forever scare the shit out of people to keep some control over their own voters.

Smart voters realized long ago that "voting only encourages the bastards", so if voting actually mattered, the governors would have to make it illegal.

 

rgraf Fri, 02/16/2018 - 14:39 Permalink

If you can pretend that a republic is somehow democratic, when the purpose of a republic is to thwart democracy, why not? If you can pretend that politicians are somehow public servants, and not the 'leaders' they pretend to be, as much confusion of the language as the banksters can muster, will be the order of the day. Until the populace starts asking basic questions, such as, who ever had the right to declare themselves to be government, in the first place?

 

The government should get the best prices on everything. Instead of discounts, they pay a premium. And it goes to their cronies. Most of their legislation is just to rig the purchase process, for their confederates.

NuYawkFrankie Fri, 02/16/2018 - 15:43 Permalink

There IS a Debt Ceiling...

it JUST happens to currently be on Jupiter... and once it reaches out for Ur-Anus, you'll know you're about to be well & truly fck'd

DemandSider Fri, 02/16/2018 - 16:51 Permalink

With never ending trade deficits, the only way to avoid deflation is by borrowing. We can choose government debt or private debt, but it's not going away unless we were to enact some serious protectionism, let the dollar fall to reality, and are prepared for the consequences.

JibjeResearch Fri, 02/16/2018 - 17:40 Permalink

That's a perfect title!

Pretending to have a debt limit just to trick the simple Americans.

Yours/our USD will get depreciated to pay for DoD and Social benefit.  To protect ourselves against this, hedge with cryptos, some metals, properties, and some cash.

Those that don't will pay dearly in the near future because the PetroDollar will not survive for long.

Herdee Fri, 02/16/2018 - 18:26 Permalink

You call that printing? you ain't seen nothin' yet. Trump has got big plans to compete with China, don't ever kid yourself. They'll take her till she busts in one huge hyperinflationary super nova explosion.

Tiwin Fri, 02/16/2018 - 18:56 Permalink

Q.

What is the difference between Dems and repubs?

A. Dems tax n spend

Reps borrow and spend.

 

Q. whats the difference between a drunken sailor and a federal politician?

A.

When the sailor runs out of money he goes back to his ship and sleeps it off while the politician borrows moar and moar.

 

An Shrubbery Sat, 02/17/2018 - 06:10 Permalink

How can we play "kick the can" without a can?

Kick that can, boyz, KICK IT!

Deficits don't matter, until they do, and by that time, I'll have mine! Hopefully...

DANIOCARNO Sat, 02/17/2018 - 09:41 Permalink

...Each country has the government it deserves !!!
If your son walks around the world spending and spending your money, at some point you have to stop, if you do not stop it he will continue to be happy spending money.

A cordial greeting.

jimmycloughlin Sat, 02/17/2018 - 10:14 Permalink

Where is the inflation going? When the world stops using USD as currency the big trouble will begin... China and Russia already started to trade oil without it...