Definite Debt Default

Submitted by QTR's Fringe Finance

It’s funny that we do this song and dance about raising the debt ceiling every couple of years. It’s about as hollow, inane and meaningless as both our monetary and fiscal policy in this country — so, in that respect, it’s warranted. It’s also great fodder for the two-party political pissing match that takes place on the daily, so as to keep us peons distracted from the ugly reality of many of the decisions our country collectively makes.

The idea being pushed by both parties — that a default would be catastrophic for markets — is hilarious for several reasons. First, we’ve been in a perpetual state of “default”, as measured by wholly unsustainable fiscal and monetary policy, for decades now. Second, the shock to our financial system that would result from finally calling our ongoing default by its name publicly, is long overdue and could oddly be one of the best things that could happen to us. And I’m not trying to be sensational, I swear.

I’ll say up front that I don’t expect a default to happen, though I am intrigued by the facts that (1) my friend Larry Lepard told me over the weekend “they are going to default” and (2) the results of a Twitter poll that I put up a couple days ago show he isn’t alone in his thinking.

Results likely skewed due to my psychotic follower base, but still…

The debt ceiling was put in place for a reason: to stop us from spending beyond our means, which is exactly what we’re doing. Just like the gold standard, it was supposed to be a guardrail that we implemented to prevent our own destruction. Instead, it has become one of many deckchairs on the Titanic that we continued to shuffle around, proudly and in the absence of discomfort or real solutions, while our capsized financial ship slowly sinks into the ocean of inevitability.

“That is the sound of inevitability.”

As House Speaker McCarthy has repeatedly noted, the issue for the U.S. is more about spending than generating revenue. If you’re interested in visualizing the conundrum the U.S. has gotten itself in, this slide deck from the Peter G. Peterson foundation is well worth a review. For brevity, here is a key visual of as how askew spending and revenue are, with spending very clearly above historical norms, outpacing revenue which also is above historical norms.

While both parties generally act irresponsibly, our nation’s spending addiction can be directly tied to Democrats’ incessant obsession with larger government and more control. The political left is too ignorant to understand that they can grip power and spending so tightly that it will slip out from underneath their fingers. Is it any wonder they also can’t seem to grasp the Laffer curve?

And so, this is the trajectory we find ourselves on...(READ THE REST OF THIS ARTICLE, FREE, HERE).