October 5, 2013

Debt Default--Now Or Later

So reopening the government, narrowing our deficit spending, and raising the national debt ceiling is coming together in planned negotiations this week. 

Despite all the talk, we continue to spend beyond our national means and basically we must raise the debt ceiling or else the game of borrow and spend is over. 

Almost like insatiable gamblers, we use up our money at the table, head to the pawn shop to sell our watch and car to replenish for the next game, and then borrow against our credit card to fuel our addiction to the game some more. 

Eventually though the house always wins and the borrower must pay up (or they get their legs broken or something nasty like that). 

So while the question posed by the pundits this month is whether the U.S. will default on its debt now, the real question is whether a default is just a matter of time anyway--as we continue to spend more than we generate in revenue as a country. 

Sure can we raise the debt limit again--hey, why not borrow more, if others are willing enough to lend to us (and for little to no interest too)?  

And can we through sequestration or more surgical spending cuts, decrease the rate of our deficit spending--however actually balancing our budget is not even on the table anymore, as booming entitlements for Social Security and Medicare are expected soon with the aging baby boomers to drastically increase our spending again. 

The hope that we will somehow, magically grow our way out is fanciful thinking--almost rising to delusions of national grandeur--that just don't mathematically add up (since we have a median GDP growth rate over the last 80 years of just over 3%). 

Perhaps, we don't care if we can't pay our debts, because we are the superpower and what is anybody going to do to us about it anyway?  

Or perhaps, we rely as a backstop on our ability to print more money and pay off old borrowed sums with worthless new money galore?

Maybe it's not a default if no one acknowledges it or we just get away with it...but somehow, someway, no one and no country can spend more than it generates in perpetuity.

If you believe in the endless virtual cycle of borrow and spend, then the mind control program is working just great, indeed. ;-)

(Source Photo: Andy Blumenthal)

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