The Phaserl


The US cannot avoid a soft default even if a hard default is avoided

Debt ceiling already breached and US Treasury operating in emergency mode while US is paying $415 billion in annual interest expenses.


All the talk has shifted from the government shutdown to the US actually defaulting on outstanding debts.  The markets were in deep fear but the last couple of days rumors that the debt ceiling would be raised put the rocket boosters on the stock market.  Of course, the majority of Americans have little money in stocks so this was more of a spectacle.  Yet what isn’t discussed is the US is already in a long-term soft default on outstanding debts.  That is, through various financial wizardry, the US is going to devalue the amount it owes through inflation by digitally printing enormous amounts of money.  The Fed already has a balance sheet above $3.6 trillion when prior to the recession, it was below $800 billion.  The end result of course is that debt based purchases like housing, college, and cars have soared in the amount they cost even though the typical household makes what they once did in 1987 adjusting for inflation.  A soft default simply means that debts will be paid but with inflated money.

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