There is a big debate currently going on (especially in libertarian circles) about the newly sworn in US Congress voting on the debt ceiling issue. The US government has actually budgeted itself in such a way that they expected the Congress to raise the debt ceiling again before April. It is obvious that the government will be given the money. Even the real conservative (do not confuse with neo-con) Republican Congressman Paul Ryan has stated the debt will be increased. I rather doubt more than a few people will vote against it. Certainly all the Democrats and most Republicans will support the debt increase. But is this prudent?
We must remember this increase is not the first and most likely not the last. The USA has by now acquired $14.3 trillion of public debt. That is an enormous number. In fact, it is equivalent to around $47,000 per man, woman, and child! And we must not forget private debt which is up to $38 trillion (a lot of this is, sadly, guaranteed by the government in one way or another). Now overall that comes to over $170,000 per person! Let me add that currently, as well as for the last 70 years, the US government has been borrowing money to be able to pay interest on previous debts. That is like me taking out a bank loan in order to pay off my monthly credit card card increases...
The only reason the government is able to service this debt at all is because it has a sugar-daddy in the Federal Reserve who keeps the interest rates nice and low. I think, in all honesty, that the US Congress should vote against raising the debt ceiling. I know this might cause a government collapse - but this is exactly what this country needs. The Fed would then be forced to monetize all government debt. That would lead to a dollar collapse and most likely hyperinflation. This, however, is necessary. The entire financial and government system in the US has to be restructured. Pushing the time of default away is just going to make things worse. Monetizing a larger about of debt will just cause more inflation. I know this is entirely unrealistic - the American government will keep borrowing to uphold its welfare and warfare states. But this is not the way to go forward. A crisis is coming and it's better to handle it sooner than later.
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Gingrich tried a government shut down in 1995, and Clinton won reelection in 1996, where he eventually was forced to reduce the deficit.
ReplyDeleteAlso, in 1946, the American debt ratio to gdp was at 121.25%, and that still didn't prevent Democratic Harry Truman from wining reelection in 1948. By 1974, American debt to gdp was down to 31.68%.
A debt crisis is coming though.