Debt ceiling and Moody's

[sinjefe]

According to Moody's (http://www.foxnews.com/politics/2013/10/10/treasury-secretary-lew-delivers-warning-to-congress-on-debt-ceiling/):

"The debt limit restricts government expenditures to the amount of its incoming revenues; it does not prohibit the government from servicing its debt. There is no direct connection between the debt limit (actually the exhaustion of the Treasury's extraordinary measures to raise funds) and a default."

So, not raising the debt ceiling has the effect of an instant balanced budget amendment? What would the ramifications be of this occurring "cold turkey" on October 17th?

[Trapper John]

Unfortunately, that's only half the equation IMO. Whereas, I have been advocating a balance budget amendment for some time (failure to raise the debt ceiling does exactly that), we also need a cap on the revenue side as well. Otherwise the only thing that will happen is that taxes will significantly increase. I suggest a value-added tax to replace income tax. The value-added tax by its very nature is self-limiting. Too high and commerce is suppressed and revenues fall.

Balance in all things Grasshopper. ;)

[Badger52]

What would the ramifications be of this occurring "cold turkey" on October 17th?For many, the cramps, twitching & nausea would be at an unparalleled level.

Seriously, amidst all the hand-wringing rhetoric about what the world would "think" of us are there any surveys that would indicate countries regarding such a step as a responsible thing? Or all they all just salivating to welcome us to their abyss?

[The Reaper]

Why not just reset the budget to 2005 levels or so and tell agencies to work within it, and only lift the debt ceiling by a limited amount?

TR

[Quartz_MJC]

No need to increase the debt ceiling if the Federal Goverment would spend within its means. If the house of representatives was clever, I know asking alot, the next "Mini" spending bill they send up should be monies allocated to servicing the nation's debt.

[SF_BHT]

Why not just reset the budget to 2005 levels or so and tell agencies to work within it, and only lift the debt ceiling by a limited amount?

TR

DHS would have a cow. They only know how to spend spend spend........

Our DHS guys here are acting like nothing is happening......

We are parking cars, car pooling and reviewing cases and putting many on the back burner until this is resolved.

[NurseTim]

Trapper, I agree with you, but with a caveat. They would need a constitutional amendment to increase the VAT and take 400,000 old laws off of the books every time they sought an increase. Start it at 10%, I mean if it's good enough for God, right? Have it added into the price of the product, we'll hardly even notice it. It taps previously missed income, like drug dealers, illegals, those working under the table, etc.

For those that say it's burdensome to the poor, I say HORSE HOCKEY! The rich buy $7 bottles of kachup, and $95 bottles of balsamic vinegar. I but cider vinegar for $3/gal and don't use that red stuff that I can't even spell. Who'll pay more in taxes me or that hoity toity sissy? Him, it'll just hurt him less, so what.

[GratefulCitizen]

With a fiat currency, federal spending is federal spending.
Whether it comes from taxes or borrowing doesn't much matter in economic terms.

The problem with borrowing rather than taxation is the fact that "borrowing" is really just a tax which is opaque to most of the people (there is also the opaqueness of taxation through international trade).
This allows spending to be higher than would otherwise be tolerated by the people.

Also, it allows government to create economic illusions which encourage most of the people to make poor economic decisions.
Businesses also take advantage of the common misunderstandings of credit and circulation. **


The focus should be on federal spending, as a percentage of the total economy.
Government spends money less efficiently than the private sector.

Bigger government = slower growth.
Slower growth=less total wealth for everyone.

Liberals are often accused of being for "redistribution".
The reality is: all government spending is redistribution enforced at gunpoint.

The reality of that redistribution is independent of the money "source" being financial markets or tax revenue.

*************
*************

As far as credit markets and money flows go, the system will remain in one form or another.
It creates more total wealth growth than the alternatives.

Does it foster imbalances in wealth and all kinds of evil? Yes.
Really, the system is just a kind of impersonal slavery.

However, if you're fortunate enough to live in this country, you can win your freedom from the slavery of this system.
All it takes is to learn how it really works, then apply the necessary courage and discipline.

Sometimes greed for acquisition of money drives poor decisions.
Sometimes fearing loss of money drives poor decisions.

Envy drives poor decisions.
Being unable to accept loss drives poor decisions.

Whatever the specifics, the love of money is the root of all kinds of evil.
IMO, people tend most often to be guilty of fearing loss.

People should be careful not to love their money so much that they aren't willing to risk it.
In the end, you can't take it with you.

MOO, YMMV.



**The Rothschild brothers observed this in the 19th century.
Regardless of the morality associated with their actions, their observations seem correct.

“The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.”


Attached is a diagram of money flows in the economy