Thursday, April 20, 2017

Mother Of All Debt

Since last week there has been lots of talk about the Mother Of All Bombs (MOAB) that was recently dropped on ISIS in Afghanistan.

Today we are reading about MOAD...the Mother Of All Debt that may be getting ready to explode in America.

In honor of the Donald’s “Mother of All Bomb” (MOAB) attack on the Hindu Kush mountains Thursday, let me introduce MOAD.

I’m referring to the “Mother of All Debt” crises, of course. The opening round is coming when Washington goes into shutdown mode on April 28, which happens to be Day 100 of the Donald’s reign.

In theory, this should be just a routine extension of the fiscal year (FY) 2017 continuing resolution (CR) by which Congress is funding the $1.1 trillion compartment of government which is appropriated annually.

The remaining $3 trillion per year of entitlements and debt service is on automatic pilot, but the truth is Washington can’t agree on what to do about either component — except to keeping on borrowing to pay the bills.

There is a problem with this long-running game of fiscal kick-the-can, however. Namely, a 100 year-old statute requires Congress to raise the ceiling for treasury borrowing periodically, but the Imperial City has now reached the point in which there is absolutely no way forward to accomplish this.

Moreover, that critical fact is ill-understood by Wall Street because it does not remotely recognize that all the debt ceiling increases since the public debt exploded after the 2008-09 crisis were an accident of the Obama presidency.

That is, surrounded by Keynesian economic advisers and big spending Democratic politicians, he had no fear of the national debt at all and obviously even believed the more debt the better.

And Obama was also able to bamboozle the establishment GOP leadership led by former Speaker Boehner into steering enough GOP votes to the “responsible” course of action.

Needless to say, Obama is gone, Boehner is gone and the 17-month debt ceiling “holiday” that they confected in October 2015 to ride Washington through the election is gone, too. What’s arrived is vicious partisan warfare, a new President who is clueless about the urgency of the debt crisis and a bloc of 50 or so Freedom Caucus Republicans who now rule Washington.

And good for them!

They genuinely fear and loathe the banana republic financial profligacy that prevails in the Imperial City, and would rip the flesh from Speaker Ryan’s face were he to go the Boehner route and try to assemble a “bipartisan” consensus for a condition-free increase in the debt ceiling.

What that means is a completely new ball game in the Imperial City that will absolutely dominate the agenda as far as the eye can see. That’s because the Freedom Caucus will insist that sweeping entitlement reforms and spending cuts accompany any debt ceiling increase.

Even “moderate” Senator Rob Portman (Ohio) has legislation requiring that dollar for dollar deficit cuts accompany any increase in the debt ceiling.

But if you think the GOP fractures and fissures generated by Obamacare replace and repeal were difficult, you haven’t seen nothin’ yet. There is absolutely no basis for GOP consensus on meaningful deficit cuts, meaning that MOAD will bring endless starts, stops, showdowns and shutdowns, as the U.S. Treasury recurringly exhausts its cash and short-term extensions of its borrowing authority.

In the meanwhile, everything else — health care reform, tax cuts, infrastructure — will become backed-up in an endless queue of legislative impossibilities. Accordingly, there will be no big tax cut in 2017 or even next year. For all practical purposes Uncle Sam is broke and his elected managers are paralyzed.

The Treasury will be out of cash and up against a hard stop debt limit of $19.8 trillion in a matter of months. But long before that there will be a taste of the Shutdown Syndrome on April 28 owing to the accumulating number of “poison pill” “riders” to the CR.

http://www.zerohedge.com/news/2017-04-17/stockman-trump-reflation-fantasy-ends-day-100

A matter of months.....

We have said it for years now.....a nation can only KICK THE CAN down the road for so long.  At some point there will be a HARD STOP that will prevent us from borrowing billions every month to meet  our obligations.

At some point investors will start to doubt whether Uncle Sam will have the future ability to pay them back....and when that happens they will DEMAND more interest for them to hold that risk.

If America can't balance it's budget today while paying 1% interest on $20 trillion of debt....how do you suppose they will be able to get ahead of the game when investors start demanding 5% or 7% or more?

We have no idea WHEN this will happen.  But we know that it will.

Luke 12
Sell your possessions and give to the poor. Provide purses for yourselves that will not wear out, a treasure in heaven that will never fail, where no thief comes near and no moth destroys.

2 Comments:

Blogger A Hubbard Story said...

Here is another incomprehensible article.

http://www.theblaze.com/contributions/dont-call-this-satanic-abortionist-a-christian-or-a-doctor/

April 20, 2017 at 2:00 PM  
Blogger dennis said...

How tragic. I would NOT want to explain to God/Jesus on his judgment day how he used the Word of God to justify ripping babies to shreds while charging $500 per murder.

April 21, 2017 at 10:39 AM  

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