Wednesday, October 9, 2013

US Debt Ceiling Debate

I am leaving the office extremely late today as we had endless discussions on how to position our trading accounts as the debt debacle in the US continues to remain unresolved and the US government remains shut down. The embarrassment continues and the US loses more and more credibility as foreign creditors slowly apply pressure on the US.

As if the government shut-down was not enough of a disaster there is another potentially bigger issues which has not been resolved since, well let’s say since never. Politicians in the US have kicked the can down the road each chance they had and never attempted to seriously offer a solution to the problem.

What am I talking about here?

The US debt ceiling; as you all know the US is broke and needs to beg the world for money multiple times every month in order to finance this illusion of power. The biggest foreign creditors to the US are well aware that the once mighty empire has more holes than a Swiss cheese and is financially worse off than some banana republics.

You may wonder why emerging superpowers continue to give the US money and the answer is simple; the world is in a transition and the new twin-super powers and their three closest allies are preparing for the power transition and that does not happen overnight or within a few short years.

The US has a debt ceiling which is absolutely worthless as it does not obey it and when push comes to shove they simply raise the debt ceiling in order to avoid default until the new ceiling is reached. This is partially to blame for the dire financial situation the US is in. The US Treasury gave Congress a deadline at which point the US will default on its debt unless the ceiling will be raised.

D-Day is October 17th for a US debt default.

As always, both parties will agree on a temporary increase in the debt ceiling which will further allow the US to borrow more money and dig a deeper hole which will be followed by more discussions which will lead to absolutely nothing.

The US is like a drug addict and the only cure is and will be once the supply is cut off. Again, this will not happen overnight and we will see a gradual reduction in foreign lending to the credit unworthy US until the power transition is complete and the US will get to taste their own medicine which they slapped on all countries which were not liked.

Currently there are talks in Washington to suspend the debt ceiling altogether until the end of 2014. This would allow the socialists to add a few ore trillion dollars of debt to the almost $17 trillion and soon we will eclipse $20 trillion and maybe an acceleration of foreign creditors who will reduce their exposure to the US.


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