The insanity continues. In government, the Secretary of the Treasury, Jack Lew, is at it again.
The Obama administration warned Congress on Thursday the government could run out of borrowing room to help pay its bills as soon as February if lawmakers do not move swiftly to raise the nation's debt ceiling.
"I respectfully urge Congress to take action to raise the debt limit at the earliest possible moment," Treasury Secretary Jack Lew said in a letter to congressional leaders.
. . .
In October, Congress and the administration suspended a $16.7 trillion cap on borrowing until Feb. 7. A new, higher limit will then be set, incorporating borrowing done through that date.
If lawmakers do not raise the limit further, Treasury will be able to juggle money between government accounts to keep just under the new limit for a few weeks.
There's more at the link.
Right now the Treasury can borrow without restriction. By the time February rolls around, it's widely predicted that it will have added at least $1 trillion, perhaps double that, to the already formidable public debt of this country. That debt is already almost out of control, as we saw a few days ago:
Yet, even with that reality staring them in the face, the Treasury (and Congress, and President Obama) are about to raise the debt limit again. Are they blind, deaf and dumb? What will it take to get through to them that you simply can't go on incurring more and more and more debt? It's already greater than we can possibly repay, unless we debase our currency through rampant inflation and repay high-value debt in eroded-value dollars. Doing that will destroy the US dollar as a reserve currency . . . unless the same thing happens to all other major currencies at the same time. I halfway suspect our financial authorities may be banking on that (you should pardon the expression).
There's only one real, meaningful, permanent solution to the problem. Government has got to live within its means, with a balanced budget, spending no more than it takes in. That means cutting expenditure (drastically), and raising more tax income (where possible), and reducing duplication, waste, fraud and other excesses in government spending. Unless we do that, the end of our current economic road is as sure and as certain as the sunset.
I've spoken in the past about the need for individual financial discipline, to prepare ourselves for the economic tsunami that's on the way. This latest insanity merely confirms my worst fears.
However, much of the private sector isn't facing reality either. It's partying like there's no tomorrow, ignoring the facts and living for today. "Eat, drink and be merry, for tomorrow we die" just about sums it up . . . but they fail to understand that tomorrow's almost here. Just look at these reports on the same day from the same news source:
- U.S. housing starts surged to their highest level in nearly six years in November.
- Mortgage applications fell 5.5 percent in the past week, to the lowest level in more than 12 years ... Total mortgage applications are down 56 percent from a year ago ... Purchase applications are down 10 percent, mirroring a slowdown in home sales in many previously hot markets.
Read both articles, and despair. There are far too few buyers in the market for all those housing starts . . . but that hasn't stopped the developers, flush with QE cash from the Fed, from building them. What will happen when the bottom falls out of the property market altogether? For the answer, see 2007-08 - only it'll be much worse next time.
"These are the times that try men's souls" . . . and their wallets, and their bank accounts, and their sanity.
Peter
