Debt Ceiling

[FireWeatherMet]

For those here who feel not raising Debt Ceiling is no big deal...(to cover debts already incurred from the previous Congress and Administration last year).

Well if you're a serious investor you should think its a HUGE deal.
Last time the US almost defaulted (Ted Cruz's bright idea in 2011) the market dropped over 20% in 2 weeks, and the US Credit Rating was downgraded for the 1st time in history, from AAA to AA.

 

[Boghie]

Somewhere, sometime...

Nobody will care what some politicians think the debt ceiling should be. Personally, I don't.

They will simply not buy our Federal debt. What then?

 

[cmil1212]

It’s just noise. Neither party will let it happen. A nonissue for investors.


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[Boghie]

For those here who feel not raising Debt Ceiling is no big deal...(to cover debts already incurred from the previous Congress and Administration last year).

Well if you're a serious investor you should think its a HUGE deal.
Last time the US almost defaulted (Ted Cruz's bright idea in 2011) the market dropped over 20% in 2 weeks, and the US Credit Rating was downgraded for the 1st time in history, from AAA to AA.

View attachment 51404

If you meant the 2013 furlough mess, the market actually went up through that slop. We had a GREAT investment year through the furlough. Nobody cared.

If you meant the 2011 fandango where the debt limit was increased, the market did decline 13% right after the debt limit increase vote (2011/08/02) and then recovered in November/December to be basically flat.

The 2011 gasbagging kinda makes my point. Our debt rating was cut even though the politicians voted a debt limit increase. At some point buyers will not buy. Then we have to go hand in mouth.

In the end Math has no ideology. It is just a hard and miserable master.

 

[Bullitt]

It's meaningless. The debt ceiling obviously doesn't make decision makers act more prudently with money.

Get rid of the ceiling and we won't have the annual panicked headlines or risk of shutdown.

 

[FireWeatherMet]

Somewhere, sometime...

Nobody will care what some politicians think the debt ceiling should be. Personally, I don't.

They will simply not buy our Federal debt. What then?

Well, for starters, if you're a Fed employee, you would not get paid, until the debt ceiling is raised.
Medicare and Social Security payments would temporarily halt.
Banks would run out of cash since there's no FED backing them up, so no new loans, and most certainly a run on the banks, and ATM's would stop working.
And if ALMOST defaulting caused stocks to drop 20% back in 2011, if we actually DO default...then make sure to keep your money in stocks, so you can experience that...then let us know how it turns out for you.

[h=1]FORTUNE: What would happen if the U.S. doesn’t raise the debt ceiling? [/h]https://fortune.com/2021/10/05/debt-ceiling-warnings-us-government/

 

[Boghie]

Well, for starters, if you're a Fed employee, you would not get paid, until the debt ceiling is raised.
Medicare and Social Security payments would temporarily halt.
Banks would run out of cash since there's no FED backing them up, so no new loans, and most certainly a run on the banks, and ATM's would stop working.
And if ALMOST defaulting caused stocks to drop 20% back in 2011, if we actually DO default...then make sure to keep your money in stocks, so you can experience that...then let us know how it turns out for you.

[h=1]FORTUNE: What would happen if the U.S. doesn’t raise the debt ceiling? [/h]https://fortune.com/2021/10/05/debt-ceiling-warnings-us-government/

They will furlough us part-time. There is enough revenue coming in to cover ~70% of expenses. See 2013.
Medicare and Social Security payments did not halt in either 2011 or 2013.
The FED is not part of the Federal spending fandango.

What you have to watch is whether the FED thinks inflation is here to stay. If so, they WILL raise interest rates.
That, and the fact that a hand to mouth employer is a crappy entity to work for.
:smile:

This phony baloney pompous gasbagging stuff is just silly anyway. When buyers demand more interest to buy Federal debt we are in trouble. That will happen soon. Inflation is the big dog here.

Math, not politics, is the Real Deal!!!

 

[joblin20]

They will furlough us part-time. There is enough revenue coming in to cover ~70% of expenses. See 2013.
Medicare and Social Security payments did not halt in either 2011 or 2013.
The FED is not part of the Federal spending fandango.

What you have to watch is whether the FED thinks inflation is here to stay. If so, they WILL raise interest rates.
That, and the fact that a hand to mouth employer is a crappy entity to work for.
:smile:

This phony baloney pompous gasbagging stuff is just silly anyway. When buyers demand more interest to buy Federal debt we are in trouble. That will happen soon. Inflation is the big dog here.

Math, not politics, is the Real Deal!!!

Wow, this can get bad

 

[DreamboatAnnie]

Great points Boghie....Your Spot On! But furloughs will not happen until debt ceiling is reached. The budget via Continuing Resolution has been passed, so that battle will start in late November after Thanksgiving. But that is just the budget... Whether we have funds authorized/available for payout/spending is a different matter and that is where he Debt Ceiling comes into play. We have never defaulted on our due payments and the ceiling always has been raised by Congress; albeit through much political drama and gnashing of teeth, but it gets passed.

Not passing bill to increase debt ceiling would be political suicide....not to mention the damage to the Trust that the World has in us, and which would effect our economy. WE MUST pay interest on our outstanding bonds held by many throughout the world plus just our regular payouts/bills due. We have money to pay (as they can just print it although this also has consequences), but question is whether Congress will agree to authorize spending above the ARTIFICIAL ceiling they have created through laws they have passed. They have the power to up the limit. If we just keep printing money, our dollar will get devalued as trust is Los in our ability to pay which then causes our interest rates to go up on our massive debt as fewer will Want to buy US bonds, and if they do, they will want a higher interest rate to take on higher risk and we do risk having our credit rating dropped. Yes, the stock market would drop due to decreased confidence. We are not too big to fail.

I am not sure if tge Federal reserve would increase the Fed funds rate as they seem to have heir head in the sand and that would make our interest payments
On our loans go up massively, but Moody's and others (outside the Federal Govt) could take action to reduce our credit rating and then buyers of bonds would demand higher interest rates on those bonds...or not borrow the money we need to pay interest/debt and that would get a different ball rolling.... I think of Greece.

Maybe I am wrong but didn't they confiscate citizen's personal savings to pay debt??? Hummm... Maybe there was just talk if that...

They will furlough us part-time. There is enough revenue coming in to cover ~70% of expenses. See 2013.
Medicare and Social Security payments did not halt in either 2011 or 2013.
The FED is not part of the Federal spending fandango.

What you have to watch is whether the FED thinks inflation is here to stay. If so, they WILL raise interest rates.
That, and the fact that a hand to mouth employer is a crappy entity to work for.
:smile:

This phony baloney pompous gasbagging stuff is just silly anyway. When buyers demand more interest to buy Federal debt we are in trouble. That will happen soon. Inflation is the big dog here.

Math, not politics, is the Real Deal!!!

 

[FireWeatherMet]

They will furlough us part-time. There is enough revenue coming in to cover ~70% of expenses. See 2013.
Medicare and Social Security payments did not halt in either 2011 or 2013.
The FED is not part of the Federal spending fandango.

What you have to watch is whether the FED thinks inflation is here to stay. If so, they WILL raise interest rates.
That, and the fact that a hand to mouth employer is a crappy entity to work for.
:smile:

This phony baloney pompous gasbagging stuff is just silly anyway. When buyers demand more interest to buy Federal debt we are in trouble. That will happen soon. Inflation is the big dog here.

Math, not politics, is the Real Deal!!!

Sorry but your whole premise is 100% wrong because WE DID NOT DEFAULT IN 2011 OR 2013.
You're confusing Shutdown vs Defaulting on Existing Debt (which has never happened before).

 

[tsptalk]

Hi FWM. I don't think I worded the poll very well. I actually reworded choice 3 before I saw this post...

From: "Who cares anymore? The debt ceiling is meaningless"

To: "Why do we even have a debt ceiling if we keep raising it?"

The debt ceiling is obviously important because of the ramifications if we can't legally pay our debts, but the fact that they raise it every year makes it kind of a lark.

Sorry if the poll started a political discussion, but I figured this one can be agreed on by most people since both parties are out of control with spending.

I know how much many of you want to talk politics, but I'd be left to clean up the mess. There are other places for that. So I'll close this thread since we know how it will end up.

Thanks.