Sunday, October 20, 2013

Why raising the debt ceiling was bad for America


I found an article in Fox Business that states simply and concisely why raising the debt ceiling was a bad thing for the USA.

... every time we are forced to print money, which occurs as we raise our debt ceiling, it devalues the U.S. dollar. This in turn makes the items that you spend your after-tax money on more expensive.

. . .

When you print more money it reduces the value of the money you already have. This, in turns, makes your lives tougher and more expensive.

So, remember each time you go to pay for something and it costs more than you expected, each time you are feeling as though your money isn't going as far as it used to, and each time you feel the strain of day to day living is more financially stressful -- you are not being delusional. It is because each time the debt ceiling is raised and we print more money and issue more debt your life and money are being devalued.

There's more at the link.

The inimitable Karl Denninger put it very succinctly.

Just remember this -- all this debt does not create value.  It may create a price, but it does not change value.  Unpayable debt is unstable just as is a jar of nitroglycerine and the more you pile it on the more nitro you put in the jar, the heavier it becomes, and the more likely it is that you'll drop it.

If you continue this path rather than reverse it dropping of the jar becomes inevitable, as is the outcome.

Again, more at the link.

Several times readers have asked me for background material that will help them see the 'big picture' of our economy, where it's at, and how it got there. Here's a reading list of books that I highly recommend.  If you read all five, you'll be well equipped to understand what's about to happen to our economy, and prepare yourself as best you can to survive it. Click each book's title to be taken to its page on Amazon.com. They're listed in alphabetical order by author surname.


Karl Denninger (2011)


Michael Lewis (2011)


John Mauldin & Jonathan Tepper (2012)


Peter Schiff (2011)


Thomas E. Woods Jr. (2009 - a very libertarian perspective)


I share the beliefs and perspectives of the above authors, many of whom predicted the 2007/08 crash and have been demonstrably accurate in their comments and forecasts since then.  I see no reason to believe the "it'll-all-be-all-right-on-the-night" milk-and-honey forecasts of 'authorities' such as Paul Krugman and his ilk. The economic fundamentals are too far out of balance.  Sooner or later, they have to come back into balance;  and if our policymakers won't allow them to do so, they'll exert the inexorable certainty of mathematics to do so themselves.

Mathematics is a science.  Science studies reality.  Reality happens, whether we like it or not.

Peter

1 comment:

Billll said...

Interesting article in today's Wall St. Journal called The Morgan Shakedown describing the governments efforts at covering up their own incompetence by bashing Morgan Stanley Chase.

It's behind a paywall but you can always buy a dead tree issue.

Sample:
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But like medieval justice, the left wants perp walks, if not heads on pikes. The assumption is that if there aren't indictments, then prosecutors must be going easy on the bankers. Poor Lanny Breuer, the former head of the Justice Department Criminal Division, was vilified for not indicting enough bankers, as if he didn't try.

The truth is that he didn't indict bankers because the 2008 crisis wasn't the result of bank fraud, despite liberal mythologizing. It was a classic credit panic caused by bad government policy coinciding with the rational exuberance of bankers who were responding to the incentives for excessive risk-taking that government created.
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I've never been convinced that bankers were particularly culpable in the current financial debacle. Banking is one of the most heavily regulated industries out there, and a banker will do what the regulators demand.