by Quoth The Raven, QTR’s Fringe Finance:
One way or another, the U.S. is heading for default…or simply coming to terms with the default we’ve been perpetuating for years already.
It’s pathetic 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 policies in this country — so, in that respect, it fits. 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.
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The idea being pushed by both parties — that a default would be catastrophic for markets — is meaningless for several reasons. First, we’ve been in a perpetual state of “default”, as measured by 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.
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 financial Titanic that we continued to shuffle around, proudly and in the absence of real solutions, while our capsized ship slowly sinks into the ocean 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 more directly attributed to Democrats’ 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:
Anyone who looks at the above two charts and advocates for more spending regardless of revenue, as the Biden administration has done, is equal parts grossly negligent and grossly incompetent.
As everybody knows, the secret to “paying off the credit card” is never to simply raise your limit again and again — it is to manage spending and start to pay it down — and there is no amount of bullshit PhD economic jargon that is going to change this basic economic law.
One of the leading arguments for raising the debt ceiling is that it’s simply “something we’ve just always done”, as though making a terrible decision consistently somehow roots it in reason and bestows upon us carte blanche to repeat our grievous error in perpetuity.
This argument has been the reason we have already been in a state of default — unable to balance our budget or pay our bills and printing new money as often as Sam Brinton brings home a new piece of luggage.
Little do we understand: this debt ceiling discussion is not us tossing around the question of whether or not we’re going to default, it’s a discussion of whether or not we’re going to finally acknowledge the longstanding default we’re already immersed in.
Read More @ quoththeraven.substack.com
