March 15th 2017

27 02 2017
Published on 25 Feb 2017

Former White House Budget Director David Stockman drops a bomb in his latest interview by saying, “I think what people are missing is this date, March 15th 2017. That’s the day that this debt ceiling holiday that Obama and Boehner put together right before the last election in October of 2015. That holiday expires. The debt ceiling will freeze in at $20 trillion. It will then be law. It will be a hard stop. The Treasury will have roughly $200 billion in cash. We are burning cash at a $75 billion a month rate. By summer, they will be out of cash. Then we will be in the mother of all debt ceiling crises. Everything will grind to a halt. I think we will have a government shutdown. There will not be Obama Care repeal and replace. There will be no tax cut. There will be no infrastructure stimulus. There will be just one giant fiscal bloodbath over a debt ceiling that has to be increased and no one wants to vote for.”

Stockman also predicts very positive price moves for gold and silver as a result of the coming budget calamity…… but zero mention of the oil problems. Typical economist, almost certainly has no understanding of thermodynamics.

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20 responses

27 02 2017
ejhr2015

This “Debt Ceiling” is a complete and utter waste of effort. The USA is a monetary sovereign nation and its constitution gives its government complete control over its currency, the US dollar. It can create all the dollars it would ever need without having to save or borrow its dollars. The Government can of course pass any law it likes to restrict circulation of its dollars, but it can never go bankrupt in so doing. This law is an example of the profound ignorance that infects the political scene today [world wide too!] The executive branches could safely ignore this law and spend what it takes to fund government spending. It is worse than superfluous.

28 02 2017
mikestasse

I think you’re missing the point…… HOW LONG can a ‘sovereign nation’ print money, at an exponential growth rate, with nothing to show for it at the end but the destruction of other countries? Or increasing poverty and collapsing infrastructure within it? How long before the currency is so devalued it’s worth nothing…….?

28 02 2017
ejhr2015

I’m not missing any point. I’m just saying what the current economic situation is and how distorted it is from reality. In the end of course we are all toast but in the meantime our forecasts are misled by lack of knowledge of where we are now, so we are unable to see just how far we have to go. Like what gbell said.

BTW the government does NOT print money -except bank notes – It buys debt Try not to keep getting that wrong. There has to be a debt for the government to buy. It does not, cannot, save or borrow its own money. This actually matters to our future path.

28 02 2017
gbell12

The US Federal Government issues debt. I don’t believe it buys it. The public and the “Federal” Reserve buys it.

28 02 2017
mikestasse

But if it issues debt, then someone has to be ‘landed with it’, and seeing as ‘everyone’ is pretty well up to their eyeballs in debt they can’t repay already, surely eventually nobody will buy the debts….? or am I missing something?

28 02 2017
ejhr2015

Maybe my earlier reply helped?
BTW, the one who doesn’t get it is Stockman. He understands bugger all about economics.

28 02 2017
ejhr2015

No, the fed buys it.Two things can happen. The recipient is a corporation etc who has submitted an invoice direct to the government which set up the project. Or the government outsourced the project to commercial banks and they loaned the money to the corporation doing the work. This is the usual operation whereas the first is the economic one avoiding finance charges that can double – or worse- the end cost. The Government then pays this inflated price.
Paying for the debt is how the government injects currency into the economy. It takes it away by taxing and other charges it imposes. The money supply is the difference between its spending and its taxing.

1 03 2017
gbell12

The US gov’t is some hundreds of billions of dollars over budget annually. Please explain how they fund that without issuing debt.

1 03 2017
ejhr2015

The Government issues instructions, instructions to purchase debts, which they have organised through legislation etc, such as the annual budget. They do not issue debt. The instructions when carried out will create debts which the Fed can buy simply by crediting the contractors account.
All the money over budget is a deficit, not a debt. It is not a saving or a cost or an asset or a liability, it is just the difference between the tax measure in the budget and what the government has actually spent, without any liability. That difference is spent into the economy and helps grow the economy. Hope this helps?

2 03 2017
gbell12

US gov’t bonds are not debt instruments?

2 03 2017
ejhr2015

Your savings account is also a Debt instrument,

3 03 2017
gbell12

You’re either very confused on this topic, or you’re not explaining well. But this being the internet, your ego will engage, and you will deny any truth to my statements. You will also refuse to learn anything, instead retiring to an echo chamber somewhere, or another venue, where your confused and/oir confusing comments go unchallenged.

The US government issues bonds to cover their budget deficit (the difference between their income and their spending). These are debt instruments and they increasing the government’s total debt. They’re sold to the public, other governments, and the privately-held, misnamed “Federal Reserve”. They receive money for this that they then give to suppliers for goods and services. According to my understanding, during this operation they do not “buy debt”, but create it.

If this is not true, then please clearly explain why, without introducing new assertions or obfuscations (e.g. savings accounts).

3 03 2017
ejhr2015

Please address your criticisms at yourself. It’s not a winning strategy to address them to me, as you have no idea about me and what I know.

However I did think you would get the connection between government debt and bank debt [commercial banks]. Sorry about that.
Your savings account is a debt instrument as far as your bank is concerned. It owes it back to you, but it’s your asset.
Government debt equally is a debt as far as the fed is concerned. But equally it is investor assets. They spend their money buying government paper, bonds etc which the Treasury auctions off. The government, unlike a commercial bank bond, does not spend that sum, so the investors’ assets remain safe until maturity. The Fed then reverses the sale and re-credits the investors’ bank accounts. No money changes hands. It’s all electronic. It may be a debt instrument but it is wealth in reality.

Do you understand?

3 03 2017
gbell12

> as you have no idea about me and what I know

I have your words.

> The government, unlike a commercial bank bond, does not spend that
> sum, so the investors’ assets remain safe until maturity.

The government takes in money and doesn’t spend it…. that’s quite a departure from my other readings. Do you have a reference that supports that assertion?

> It may be a debt instrument but it is wealth in reality.

Debt is wealth? War is peace?

In your zero-sum description, you’ve left out the nearly $20T of outstanding debt. While they may tidily pay back maturing bonds, with the other hand they’re funding it by issuing even more debt.

Debt is an instrument of liability.

You’re saying things that contradict my other sources, so please share some reading I need to do to correct my understanding.

3 03 2017
ejhr2015

“Debt is wealth” You are serious in querying that? Book keeping 1.01. One’s asset is another’s liability. I have your words. It shows you are incapable of understanding even rudimentary economics etc.
I’m wasting my time or you would have made some progress by now.

4 03 2017
gbell12

Yes, I’m aware of double-entry bookkeeping. Your inability to provide sources for your bizarre assertions, and your resorting to personal attack when I point out your $20T omission, shows your knowledge, arguments, and ability to communicate are poor.

I guess we’ll all have to just watch the US become ‘wealthier’ as it piles on more and more debt 🙂

4 03 2017
ejhr2015

poor you! wingeing about what you should understand, but don’t. Now that’s bizarre! you are wrong, with knobs on.
However here’s an education opportunity;
http://www.moslereconomics.com/2009/12/10/7-deadly-innocent-frauds/

28 02 2017
gbell12

Amazingly, Mike, US-issued debt is still considered safe, and a good option in the climate of ‘competitive devaluation’ by governments around the world.

There are all sorts of ways they’re in deep trouble in this department, but if public taste for these bonds goes away, the privately-owned “Federal” Reserve, can buy it – the “buyer of last resort”. They started to years ago, which looked so much like the snake eating its tail that I was sure time was limited.

It’s so Byzantine I don’t claim to understand it.

Here’s an attempt at plain-English:
https://www.thebalance.com/how-is-the-fed-monetizing-debt-3306126
https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124

And here they are flat-out denying it:
https://www.federalreserve.gov/faqs/how-does-the-federal-reserve-buying-and-selling-of-securities-relate-to-the-borrowing-decisions-of-the-federal-government.htm
https://www.federalreserve.gov/faqs/money_12853.htm

28 02 2017
gbell12

Predicting doom from something so artificial and easily manipulated… not useful.

28 02 2017
gbell12

> HOW LONG can a ‘sovereign nation’ print money

As long as the petrodollar is in place OR the dollar is the most trusted currency despite its treatment (“best looking house in a bad neighbourhood”).

> with nothing to show for it at the end but the destruction of other
>countries?

An exaggeration. They also spend it on housing (indirectly), infrastructure, research, technology, and lots of other things that will be there at ‘the end’.

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