Ok first off, we have raised the debt ceiling 78 times since 1970 this is not a new thing. Why was this such a big deal then? Well basically the Republicans wanted to make Obammer look bad.
Now obviously its not as cut and dry as that, but that is one of the main ideas. The problem I have with all of this is that they aren't really making actual cuts. The budget will still be raised 8% in 2012 and another 8% in 2013 and so on. It also didn't put any restrains on discretionary spending.
Right now we are roughly at 92% of GDP in relation to debt. Estimates have us above 100% of GDP by 2018 which isn't good. With a National Debt figure of 20 trillion by 2020
What we truly need is an complete overhaul of the system. We need balance budget reform, and a new tax code. We also need to make senators and congressmen part of the system. No free health care for the rest of your life after serving one term and no full pension either. You get social security and private health care. Wanna bet they would make some decisions then!
See all that happened over the last couple of days was political pandering, and how it affects you are I is that they fuck up the markets.
Hope your first sentence is pure sarcasm. You're a sharp guy financially, so you know exactly why it is a big deal.
It is a big deal because we are quickly approaching the point where the incoming revenues will not be able to pay debt service. Our "minimum payment", that AUTR referenced above in his example which is spot on, will be higher than what we will be able to pay if the national debt goes much higher. UNLESS....revenues increase which = tax increase/spending decrease. And you want to talk about shit hitting the fan? Default will not be the word. We would more or less be in "Collections" to the Chicomms by our own fucking bank.
Which leads me to agree with your overall point or the bigger picture. The entire system needs to be dealt with from top to bottom. The way our monetary system is setup is one big failure. Its fiat money.
Most economists with half a brain refer to it as "monetizing the debt". As an example, if the US Government wants to borrow $1 million dollars, they go to the Fed to borrow the money. The Fed calls the Treasury and says print 10,000 Federal Reserve Notes in units of one hundred dollars.
The Treasury charges the Fed 2.3 cents for each note, for a total of $230 for the 10,000 Notes. The Fed then lends the $1 million to the government at face value plus interest. Can you say racket?
Look at the economy in the late 90's. Things were booming. Why? Because the Fed had been very liberal with its debt/credit/money, as we have now found out with the housing collapse (Fannie, Freddie, etc). The market was hyperinflated. BUT, who creates inflation? The Fed. How do they deal with inflation? They restrict the debt/credit/money. What happens when they do that? The market collapses, becomes stagnant. Stagflation occurs. Which is what is happening now.
All total Bullshit.
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