The Dangerous Debt Ceiling Dance
Hallelujah! Salvation is here. Or so we are supposed to believe. The 3 Ring Circus that is two branches of Congress and the Administration is finally close to an accord on debt mania madness. What a surprise. Not…
We all knew this would happen—very simply because it had to. First and foremost, if the debt ceiling was not raised, 100 senators and 435 congressional reps would be on the unemployment lines with the rest of America. (Not a bad thought). So to save their jobs and to save face, the government by the self-serving, for the self-serving, of the self-serving finally got something productive done and stopped pushing the world’s largest economy to its knees.
The question was how much peacock posturing between politicians would we have to endure to get here? It was high drama in DC this past month with the Tribe of Orange (Boehner) and the Tribe of Peely Wally (Reid) going head to head in the battle of bungling economics. There is simply no excuse for the dangerous debt ceiling dance these power plays forced the nation and the world to endure. My thoughts? Get yourself a Reality TV Show and save us some precious time and money. We could call it: Pork and Politics.
This past week, the words of founding father, Thomas Jefferson came to mind: “The credit and fate of the nation seems to hang on the desperate throes and plunges of gambling scoundrels.” That was 1792 and over two centuries later, we are still held hostage to the throes and plunges of scoundrels. Shocking as it may be to contemplate, America has been levered up since its inception. Somehow we have become the world’s greatest economic power despite this. Alexander Hamilton believed that debt was actually good for the nation and banked our future on it.
The years after the Revolutionary War, the little upstart nation had virtually no economy and was mired in debt to foreign governments like France and Holland who bankrolled the war against England. By issuing debt, in the form of the first United States Treasury bonds, Hamilton transformed an economically devastated rag tag nation into an emerging global superpower in a decade. He also emphasized that our credit worthiness as a global economy was essential to that prosperity. In his view, the U.S. financial future was dependant on honoring our debts—this is a fundamental principle that our nation’s economic system stands on.
Conversely, the result of the current debt debate has created doubt of U.S. reliability in the minds of American and foreign bondholders. A massive exodus from T-bills has been led by none other than the world’s largest bond manager, PIMCO, CEO Bill Gross revealing the serious concerns the political debate has created in the investor community.
Investment virtually came to a halt last week in new and growth businesses as the financial markets pulled in their sails to wait for the United States Congress to get its act together. The credit and fate of Main Street and Wall Street hung in the balance as the debt dance continued.
It was all about winning and gaining Street Cred. Who would come out looking rosy? Who would come out emasculated? Whatever the mainstream media reports this week, it does not matter. They can tell us over and over according to their partisan belief “who won,” but we will never believe them. Because the American public sees most of our lawmakers as puffed up partisan fools who care nothing for any of us and only for their own reelection. American politics seems to have dwindled from genuine intellectual ideology of the distant past to political self-interest on steroids.
In all the conversations about cuts for this program or that, none of it revolved around how to help long-suffering citizens. The discussion centered on the selfish interests of the political parties without any thought to how all of this cost cutting would affect the devastated job market, the wounded credit markets, and the struggling-to-stay afloat business and unemployed communities.