Yesterday we were told by the president that “raising the debt ceiling doesn’t allow us to spend more, it allows us to pay our bills.” Really? Not spend more? Then… what happened to the $2 trillion+ “raise” of the debt ceiling just 18 months ago? Was that not “spent?” If it wasn’t “spent” then where did it go? To pay interest? No, can’t be that because we are not paying any more interest today than we were 10 or 15 years ago even though the debt is 3 times higher. (Neat trick huh? Take on 3 times more debt but cut the interest rates by two thirds and presto! You don’t pay anything more in the way of debt service).
How disingenuous? Raise the debt ceiling… we promise not to spend it. Does anyone see that if they DON’T “spend it” we will immediately enter a statistical depression? This is exactly where and what HAD to happen with the Ponzi con game that was set up in 1971 when Nixon took us off of the Gold standard. Allowing the creation of unlimited “money” through the “unlimited” creation of debt meant that the only way to continue the game was to do exactly that… create UNLIMITED amounts of debt. And here we are at “the moment of truth” where the debt service that did not rise because interest rates were lowered… mathematically is going to rise.
Never mind that interest rates will rise as demanded by Mother Nature. No, debt service will rise even if rates don’t because of the AMOUNT of the national debt. We have crossed the Rubicon where where interest payable must finally rise simply because the amount of debt which was “hidden” in plain sight is so large and getting larger. You see, we didn’t “feel” the additions of debt (other than living in an economy that was far stronger than it would have been without the incurrence of and spending of the debt) because as interest rates went down and debt was rolled over (refinanced), the debt service did not rise. That game is over because interest rates cannot go negative for any length of time no matter how badly Ben Bernanke, Tim Geithner and the rest of the tragic cast would like them to.
But wait just a minute, I had a funny thought. During the fiscal cliff talks didn’t the president dig his heels in and say that “spending will not be cut, only taxes will be raised?” So by saying yesterday that “raising the debt ceiling will not allow us to spend more” he means that now, spending won’t be cut or raised? Is this even possible? “Frozen” spending? I highly doubt it.
The real point is this, debt service will now and in the future take up more and more of the “spending pie,” it has to mathematically. And because it is not possible to tax enough to match spending we will HAVE to borrow more on a continual basis to “pay our bills” as we were told. This is the root system to the fabled “QE to infinity” that Jim Sinclair so aptly named. In reality the “infinity” part is not true as “infinity” can never really be attained. In reality, QE to “oblivion” is where we are headed. Do the math yourself; QE can never be stopped, for that matter it can never even be slowed down. …And the result? Economic, financial and social oblivion! This is not grandstanding or fear mongering, it is math, pure and simple. “QE to oblivion.”