As the United States’ industrial sized Visa card maxes out its limit, there are interesting thoughts being floated for handling our debt crisis. Federal Reserve Chairman has a fascinating take on how to handle the debt ceiling….”get rid of the debt ceiling”.
Technically the American debt ceiling topped out on December 31st of last year at a robust record of $16.394 tillion dollars. Legally the US Treasury is not allowed to borrow any new money until the debt ceiling is raised.http://topics.nytimes.com/topics/reference/timestopics/subjects/n/national_debt_us/index.html
In the meantime the US Treasury has resorted to creative financing in paying America’s financial obligations, however Treasury Secretary Tim Geithner noted that the measures will run its course by late February or early March which would set the stage for another Capitol Hill financial showdown.
Should America’s ability to pay its bills fall into jeopardy, United States credit rating could be downgraded which would add billions of dollars to the burden of carrying additional debt.
Although the Fed chairman’s idea of eliminating the national debt limit seems like a good idea for those on a spending mission, nobody knows what the impact would be in having unlimited borrowing available to the US government.
The alarming increase in debt has already made conservative fiscal money handlers cringe at the idea of increasing the debt ceiling where it would encourage further borrowing on top of spending all the revenue the government currently collects. This is uncharted territory where even the most expert economists debate on the consequences of adding more record debt upon the public.
The Federal Reserve controls the money supply and loans money to banks at extremely low rates. Bernanke’s quote to “get rid of the debt ceiling” would allow the Fed to lend money without any restrictions to the government. Whether this is a good thing or a bad thing is dependent on the economic philosophy of the person you are talking to.
Fiscal conservatives are concerned that America could spend itself into socialism where the government becomes the have all and be all of finances. Bank failures are protected by federal depository insurance, but what happens if the government is declared insolvent? Can one really borrow its way back to solvency?
One Biblical principle is certain, and that is the borrower is a slave to the lender. Carrying excess debt is a curse and anyone with a little bit of economic wisdom knows there’s a point where overspending and heavy debt will crush your finances.
We have spent our way into this economic mess and it seems ludicrous that we can spend our way out.