The US Govt is about to max out their $16,700,000,000,000.00 limit credit card....

[MarkB]

And like all prudent businesses / households who get deep in the financial poo - they of course just borrow more money.

There really is nothing like kicking the can down the alley...

...avoiding the real issues....

...and "hoping to [insert name of preferred deity here]" that when the music ultimately stops, you're not the one holding the parcel.

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See: U.S. to exhaust borrowing capacity by October 17: Treasury

U.S. Treasury Secretary Jack Lew warned Congress on Wednesday that the United States would exhaust its borrowing capacity no later than October 17, at which point it would have only about $30 billion in cash on hand

The fresh estimate adds another layer of pressure on lawmakers to raise the $16.7 trillion debt limit and comes as Congress struggles to pass a spending bill to keep the government funded beyond October 1, when the new fiscal year starts.

"If the government should ultimately become unable to pay all of its bills, the results could be catastrophic," Lew said in a letter to congressional leaders

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They will, of course, stitch up a deal to increase the limit....

But at what ultimate cost?

 

[greedy2000]

I always say "hope is not a strategy"

But it seems that there are a few governments out there implementing the "hope" strategy

 

[willair]

October is always a bad period on most Equities markets worldwide,and most professional predictors do not include people from the street opinions so maybe they may well just span out the debt limit timeframe again and again not something that they can insure against,or they just fool everyone by grabbing the attention of sideshow standalone investors via your emotional side..

 

[Indifference]

This happens every 6 months or so.... they will just kick the can down the road again.... mo' money mo' money... print, print, print...

The recent no tapering news just adds more fuel to the debt fire. Here's an interesting fact to consider:

If the US stopped deficit spending immediately AND payed down existing debt at a rate of $100 million USD per day, how long would they need to pay it off?

The answer is sobering....



p.s. Yes, I realize that zero debt is unrealistic for any country....<-- someone will raise it otherwise!

 

[MarkB]

If the US stopped deficit spending immediately AND payed down existing debt at a rate of $100 million USD per day, how long would they need to pay it off?

457 years, 6 months and 14 days by my calculation....

A geologist or an astronomer would tell you that is not even a blink of the eye in the overall scheme of things...

However, I think the official term for that amount of time in economics is "you said ******* how long?!"

 

[datto]

As soom as the US economy starts pumping on all cylinders, this debt will seem like an itch on ya backside.

 

[Indifference]

As soom as the US economy starts pumping on all cylinders, this debt will seem like an itch on ya backside.

Ever consider that US economic expansion may have already peaked?...... There was a time when countries such as England, Spain, Greece etc... had economic hegemony....

Perhaps the US will have a real economic recovery.... or maybe, just maybe, the economic tide has turned. Japan (global no. 3 economy) has been trying to print their way into economic recovery, and it isn't going very well.... Look over history and no country I am aware of has been able to pull off such massive monetary expansion, without experiencing 'extreme' inflationary pressures....

 

[Colin Rice]

457 years, 6 months and 14 days by my calculation....
[/I]

you are no village idiot

 

[datto]

Good point Indifference.

Maybe one more big war could help the US chug along.

 

[Indifference]

you are no village idiot

It is all relative.... he has a lot of competition in the land of the long white cloud...

 

[o0o]

you are no village idiot

I didn't account for leap years
167,000 / 365 = 457.5342465753 years

 

[MarkB]

I didn't account for leap years

True, it didn't.

It was a 5 min job in excel (as the time stamp shows on the posts, still it was wrong).

114 leap years - takes it down to 457 years + 81 days (instead of 195 as originally calculated).

Today is 29 September 2013

There are
30 days in sept
31 in oct
(totals 61 days)

So 457 years, 2months and 20 days (give or take).

Anyway, this idiot is off to do something important.

o0o - I trust you'll let me know if I am wrong, again.

 

[o0o]

I'm watching you

 

[Aaron Sice]

Remember...the average person cannot count to a billion in thier lifetime.

 

[willair]

I still don't know what everyone is worried about any Government can freely just print their own money to pay back their cash flow negative obligations inbetween the panic and sudden crashes if they are true street smart,or they just twist the simple media lines to sound right without being right or wrong..A gentleman named Bill-L,used to post here it pays too read into his posts they were priceless in times we are about to go into..

 

[DavidMc]

I still don't know what everyone is worried about any Government can freely just print their own money to pay back their cash flow negative obligations inbetween the panic and sudden crashes if they are true street smart,

... what if they are at the stage of their income being less than the interest on their debt...?

 

[MarkB]

... what if they are at the stage of their income being less than the interest on their debt...?

Hi David

I think the first part of Willair's post was a bit tongue in cheek - and the real message was in the 2nd part...

A gentleman named Bill-L,used to post here it pays too read into his posts they were priceless in times we are about to go into..

[emphasis added]

But to get back to your question....

Yes, there is the question of the interest on the debt.... though it does appear that since the US government has engaged in deficit spending for the last 40 years or so* - that they are capitalising the interest and paying for it with yet more debt.

I haven't done the math but afaik the US Government is not at the Interest > Income stage... yet.

But since the debt appears to be growing faster than the economy (how fast can an already industrialised economy grow??) it does beg the question of whether, as things stand, they are on course for fiscal oblivion.

So (imho) they either eventually default or, at some point, they take their medicine and get back to surplus (austerity).

Either would put considerable strain on the world economy (and Australia would not be immune to the effects).

*The US Government did return to surplus towards the end of the Clinton era, but deficits returned quickly after Bush II assumed office. So aside from that couple of years, iirc, the US Government has run deficits since the time of Nixon in the early 1970's and the Vietnam War (Nixon broke the gold standard by printing money to fund the War)

 

[HiEquity]

The amount of debt is high but the interest bill is very low. Because the interest rate is incredibly low. Lower than the inflation rate in fact. In the context of negative real interest rates like this it begs the question of who is taking the biggest risk - borrower or lender. Arguably the more the US govt borrows at these rates the more money they make in real terms. The lenders are paying the borrowers for looking after their money.

I suspect this is what was being alluded to with the Bill.l reference. Money is the creation of man and in this case the USA gets to effectively set both the amount of USD in circulation a and their borrowing cost so as to make money from the process. For as long as the lenders keep playing the game it all smells of roses. After all where else can they put their money?

I know I would borrow as much as I could if the interest rate was below inflation!

The risk in this strategy is that it can all come crashing down from the giant game of chicken being played right now on the Hill.

 

[MarkB]

The amount of debt is high but the interest bill is very low. Because the interest rate is incredibly low. Lower than the inflation rate in fact.

Doesn't change the end game... just spins the music out a bit longer before it stops and they realise they don't have a chair to sit on...

The risk in this strategy is that it can all come crashing down from the giant game of chicken being played right now on the Hill.

And even if he interest rate is ludicrously low, they're still accumulating debt at an alarming rate.

 

[see_change]

Btw

Bill L is still around and going well . He said hello to me on another forum .

We reminisced about a certain topic ...

Cliff