Sunday, July 31, 2011

Debt Limit

The debt limit debate continues today with possibilities of agreement today (Sunday).

Couple of things to consider on all you have been hearing on the debt limit.

First we keep hearing the dollar will decline and interest rates will go up if the ceiling is not raised. Has anyone noticed that for 3 years the dollar has gone down? It will probably continue to fall some in future particularly if the US government does not control the deficit spending.

In 2002-2007 the deficit ran 250-400 billion annually. Since 2007 it has been over a trillion dollars. This was supposed to be a one year increase in FY 2009 but here we are in 2011 and headed to 1.4 trillion.

Pay attention to deficit and debt. The debt is how much does the US owe. The deficit is how much more are we spending in a year than we take in. They are different although many stories and people mix them

Interest rates will rise whether the debt limit is raised or not. The Federal Reserve has had the benchmarks at about zero now for several years to try to encourage growth. Many of us are concerned this will cause hyper inflation. Somewhere in the near future the Federal Reserve will begin raising the interest rate benchmarks.

Why is it that when congress and the president talk about budget/deficit reductions they can only talk in goals fro 10 years and not how much to cut now. It is like me saying that I will cut my gasoline usage over the next ten years instead of talking about now. We can talk on that but unlikely when then gets here we will do it.

The credit rating of the united states is not being threatened by the debt limit being met. The rating agencies are concerned the US has gotten to much debt. Raising the debt limit will not prevent them cutting the rating. Cutting the deficit will.

Congress and the president are the only organization I know that decides how much they can borrow. If I decided to raise my debt limit ceiling to one million dollars and went in the bank tomorrow do you think my friendly bankers would tell me they are glad to loan me one million dollars since I raised my debt limit ceiling to that? No they would sit there and go that is a good joke you came in and told us today Dwight, have a good day.