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Monday, October 7, 2013

Debt Ceiling: Running an Economy the Wimpy (Popeye) Way

~ "I'd gladly pay you Tuesday for a hamburger today."

Its day seven (we think) of the (partial) government shutdown.

What can we say..

As Americans, we've survived Civil War, Great Depression and WWII rations.. Hell, we've even survived New Coke back in the mid 1980s..
So we at A&G are supremely confident we can survive being denied entry to see the Lincoln Memorial.

Sorry but he really wasn't That great a man, although connecting back to Friday's post, can you imagine how "honest" Abe would be perceived today if his monnicker was 'The Great Compromiser'?

The market really doesn't care.. Sure its down 72 pts as of this writing but its perfectly at 15,000.

Oh these vermin and their statistical thresholds!!...
And then there's this whole debt-ceiling 'thingy' coming up by the 17th supposedly.  We've never seen a 'line in the sand' yet respected by the US Government where they did the setting and war with another not involved.

So many options open if the ceiling isn't raised.

We hear the Treasury has an additional week or so of funds beyond the 17th...  We also know all funds will be diverted as feasible to keep paying, so really we will never default though we should or could...

And what does it mean to raise the debt ceiling anyhow?
Well think of it this way..  You have a credit card in your wallet or purse... It has a credit limit of $10k and you owe $9,998.92 as a carrying balance.

A snap of a finger..  Ta Da..  You now have a credit limit of $15k

Your debt balance didn't change, nor did your interest rate...  All that happened is you, a person who has proven that you can't pay down $10k can now have access to $5k more.

That's the USA...   We take in less tax revenue than we spend compiling annual deficits which expand the debt, spend money on frivolous things we don't need or benefit the populace, then dilly-dally with the ceiling every couple years.
We remember back in the mid 1980s the Democrats pointing out that due to tax cuts on the wealthy and tossing money on weapons programs like 'Star Wars' , President Reagan was dragging our national debt to an appalling $1 Trillion.

In fact Reagan did do that-- took us 200 years of existence as a nation to get to that debt level

But hey, we won the Cold War and got to see our corporations expand its tentacles into the former Soviet Union so that the former Iron Curtain could be exposed to Big Macs and fried chicken, so it was all worth it..

Then took us 25-30 years to get us to around $15 Trillion.
And in the last few decades we never made any sincere attempt to pay down this debt.. Only the deficit.

Alas, its always about debt.

This nation goes kaput if we do not secure more national debt.

We also go kaput if our citizenry does not either.

We've mentioned before that this past Friday was the 100th Anniversary of the signing of the 16th Amendment into law..  Income Tax.  It was originally was sold to the people as a tax on the wealthy (only the top 1% was to pay it)
Imagine if life was like that today.   You make $50k.. you keep $50k..

What would you do with that extra money annually?

Put a much greater percentage down on a home or car?  Save up so you could afford 100% of your child's college education without need of loan?  Take trips and do fun things, then pay your credit card balance in full every month??

And how in the world could the system profit off you if you have the means at your disposal to get wha you want?  How could banks charge you interest on high balances?
How could employers get you to work harder and control your spirit via fear of termination if you had more nest egg cash to withstand being with out work until the right job came?

We as a nation survive on debt; IOUs..  Our dollar bills say it..

"Legal tender for all debts public and private"

Everyone must be indebted between 18 to 68 or we have no banking or motivation to work; we have no nation.
Ever wonder why the debt ceiling isn't just raised to $100 Trillion.. Or a Zillion dollars?

Well, if we did, we'd spend it and in 2 years, have to raise the limit to $2 Zillion..

Just the way human beings are..

So the debt ceiling will be raised ultimately.. eventually.. and the government shutdown will end eventually.. ultimately..

And just in time for the holidays we all can go back to living our lives of contented consumption.