I need a "Debt Ceiling for Dummies" lesson please.

I am going to go right out and say I am completely ignorant of the current debt ceiling issue or the debt ceiling process overall. I would like an UNBIASED explanation of the effects of either raising or not raising the debt ceiling. I get into certain parts of politics, sure, but on this one I am completely ignorant. I just want a simple explanation of what we have it for and what would happen if it was raised or not. I don't want some partisan mumbojumbo, I want a lesson. Thank you!

reply to post by Hockenberry0001


Hush . I accidentally pressed enter instead of tab >.<

If you are a typical family, don't spend more than you earn.
If you're a typical government, spend more than your typical families can earn.
Then give yourself the consitutional authority to spend even more than that.
Because you owe interest payments to other governments that have done the same thing,
to their typical families.
Repeat ad nauseum, ad infinitum.
Every single year.

Here is my thread from two years ago
(yea! for self promotion)
where I took a pass at explaining debt.

Some people seemed to think it made sense.

www.abovetopsecret.com...


David Grouchy

Here is a quote of one of the comments in the thread.

freaking excellent...you are good.
i'm a proffessional currency account money manager and i see this as new math!...how cool. ....yessirrr!

Yeah me too. Because I don't even understand why we as Americans "borrow" the money we use in the first place.

The Congress shall have Power ...

To coin Money, regulate the Value thereof...

So... why exactly are we "borrowing" money from a private central bank when we have the power to just make money, free of any interest??????

This government seems to think its like this. Get a credit card. Max it out. Whine that you can't buy any more and expect your credit card to raise your limit. Max it out, raise the limit. Max it out.... you get the idea.

At some point these idiots need to STOP SPENDING and get their crap under control. And while we're at it.. what about this clause in our wonderfull government documents??

To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;

How long have we been in Iraq and Afghanistan now?? Lets get the hell out of there and save lives and a ton of money.

Here is a comment I made in another thread (again 2 years ago).

The question in the thread title was "Where did the money go" This post starts with that question in mind.
======================================================

"Where did the money go?"

You don't want to know.

No really.

You don't want to know.

If I tell, the urge to destroy this post
will overwhelm any use the information may bring.

**************

How can I be so confident saying this?
Surely everyone is different, so it is impossible for everyone
to hate or disagree with what I write.

My answer to that, is no. Not in this case. There are too many enchanted words,
to much agenda oriented political posturing, and too little real education
for anyone to hear what I'm saying without making sure I'm dead first.

**************

Then why am I writting this?
Because I am going to tell you where the money went.
But then I'm going to log off and not come back for a week.
Maybe two. Maybe not till after christmass.

You know why?
Cause I don't want to hear it.
There is no reason for me to sit here
and experience a scorched earth policy
against my post, when three years from now
everyone will _know_ this stuff, but till then I'm a heretic.

And when the age of reason finally dawns,
no one weeps for all the burned witches
from the day before.

======================

Enron collapse
All those guys indicted at the top had no clue that Enron was a front for the Black Budget of our intel communities. After the new york disaster they had to reposition quickly and the money was moved. The guys who took the fall probably still don't know what really happened.

Housing Bubble
Everyone who lost a house they were living in was because no one is paid a fair wage anymore. Used to be that if someone got married ... they got a raise. If someone had a child ... they got a raise. If someone bought a house ... they got a raise. This entire, well publicized episode is just a clever way of not admitting that divorce is profitable for women, and women who flip houses can proove to each other that they are better off without a man. Call me any name you want. The housing bubble was the extinction line of the extended family.

Bank failures
There is a computer program that can predict the stock market. Let me say that again. There is a computer program that can predict the stock market. It's almost 20 years old, and still almost no one seems to know about it. If you are not buying a stock that pays dividends, and if you are buying a stock for any reason other than to recieve dividends, then you are being had. Derivatives are another word for crack coc aine. It is not food. It is not productive.

Advertizing
What is this all about. Why does the total advertizing budget of the world almost exceed the actual cost of making everything in the world. It's simple. We stopped watching TV like it was a religion. Remember when the fall sweeps was the big to-do for the Neilson ratings. Well one year, no one showed up to watch all the new shows that fall. This meant that the broadcasters couldn't charge nearly as much for comercials. Where had all the people gone? They were on the net, playing online games. A place where advertizers not only had zero penitration, but massively entrenched resistance. Didn't you ever wonder why there are so many free mmo's now, and only a few websites that can operate without advertizing dollars. Doesn't anyone remember that a single comercial on a website used to = death for that site. It is not a coincidence that we don't make as much money anymore and have newfound respect for Madison Avenue.

Space Travel
The one growth industry that America used to have. The one that we were the leaders in. The one that used to be the hope for the future, was destroyed with a simple smart alec comment. "We have enough problems here on earth." Yeah right. And now that we have abandoned our own futures to fix things quote here-on-earth end quote, how's that working out?

Customer service
Have you been through a drive through at a fast food restaurant lately? A line of cars around the building idling and burning gas for a half hour, while the person in the window is talking on their cell phone. If it costs a company $5,000 to hire, insure, train, uniform, file paperwork on, manage, feed, and be sensitive to their harrasment fears, but that employee drives off two customers a day. Who never return. Where do you think that money is going. That's right, it's being spent to provide safe environments for people to text each other. This is the opposite of value added. I would outsource too. And not because it's cheeper, but because I can't afford bankruptcy. Imigrant labor is a form of outsourcing.

Insurance
Massive early retirements by doctors was caused by predatory insurance rates. No one remembers that before we had a health care crisis we used to have doctors who could afford to practice. The small owner opperator Doctors' office has been made extinct by a collusion between politics and insurance conglomerates. Now we have a bunch of doctors who are nothing but cogs in a system, who join that system weighed down by massive education debts. Don't get me started on how many people DID NOT receive a penny for their flood insurance after Katrina.

Where is all the money
I worked in a vault. Money deposited is recorded in the red. It is recorded as a negative number. Untill it is loaned out, at interest, it is doing the bank no good and only constitutes a cost. At the highest levels everyone knows this. I think they like to keep everyone freaked out on purpose. OMG, if I had a billion in debt I wouldn't know what-to-do.

[color=gold] Look at it this way. You own a carnival. At the entrance your teller sells tickets. Everyone has to buy tickets to ride the rides. Say the teller is given a spool of 100 tickets. This is recorded at minus one hundred. As cash is taken in and tickets go out, it offsets the deficit. But as long as the total cash and number of remaining tickets = 100, there is no theft.

Then there is a line of ten people. Fine, and well. Each one can buy ten tickets, ride several rides, loose a few tickets, still have fun. But say this day there are 100 people in line, and the first ten buy ten tickets each. You now have 90 angry people with crying children who can't get in. So you give the teller a spool of a thousand tickets. It's now a deficit of 1,100 dollars. And increase of 1100% in debt. Omg omg, chicken little chicken little. Alert the press. News anchors from around the world converge and announce grimly into the camera "this little carnival is massively in debt by over a thousand percent." The remaining 90 people in line are happy though, but that's not reported. And strangely enough, people stop showing up for the carnival. So just at the moment you, the carnival owner, was going to have your best year ever... all your customers stopped comming.

You wana know where the money went?
You burned it when you lost faith in your own country.
All the way back when you said space is too dangerous, or I wana sue my doctor.


So you tell me.
Where did all the value added go?


David Grouchy

Check this site out:

www.justfacts.com...

I promise, it explains it all.

Basically, the debt ceiling is the limit on what the government can spend.

Since the government spends more than it takes in, this is essentially them going to the Federal Reserve and borrowing more money to operate.

Operate = making payments on previous loans taken out when the debt ceiling was raised previously.

We are still paying interest/payments on those loans.

What happens when you stop making payments on your house or credit card?

You default and your 0% APR interest goes to 28% and your credit is ruined.

This is what we risk happening. But businesses will still do business, people will still go to work, but the government won't be able to spend any more money at ALL, they will only be able to spend where they cut.

Hope this helps.

~Namaste

ETA: By not raising the ceiling, we would default and be forced to pay our obligations before being eligible for any other lines of credit. We could afford to do this, but as a result of the credit being ruined, the banksters would pass this on to the consumer in the form of interest rates or major inflation to cover their spread. Raising the ceiling means these same banksters have more time to milk the remaining populace and kick the can further down the road. We will always have to keep borrowing to pay the increasing interest payments for money that we keep borrowing.

If you have a credit card with $500 and another for $250, it's like having your $500 card maxed out and making your payments on it with the $250 card... you're paying interest on BOTH the payments you're making and the additional money you are borrowing to pay it. This is what's happening here.

The funny thing... the government could just tell the Federal Reserve that they revoke the right to print currency, pay all of our debts, and re-issue dollars from the Treasury directly. This would pay off all of our debts and allow us to "reset" the game in a way.

reply to post by angrymomma


I am certain that there are people who will disagree with parts of what I am telling you. But this is the gist:
The U.S. has already spent/committed to spend the money

Not raising the debt ceiling (which has been raised many times before) would result in the U.S. not being able to pay all of its outstanding committments

There is revenue coming in. This revenue would be enough to cover the actual interest owed to foreign parties on debt.
However, most of the rating agencies would downgrade our national credit rating if we were only able to pay the foreign parties and not meet all of our obligations (foreign and domestic).

When a credit rating is downgraded it costs more money to be in debt.

The amount of money that the U.S. already owes (and on which it must make monthly debt payments) would become more costly to make the "minimum monthly payment" due to the downgrade in credit rating. So it will cost the governemnt more money per month to owe exactly how much it owes now.

Additionally, the monthly revenue coming in, as noted above, is NOT enough to cover the debt interest and all of our other obligations. So what don't we pay? Social Security is an actual possibilty (though such an upopular move that I don't think it would be first on the list of no pays). Other things that we have and do in this country would be without funds.

There are those who ideologically believe that the government is invovled in too much.
Take away their ability to pay money for those things and *poof* the government is no longer involved in such things.
They are the ones who do not fear default.

For the rest of the country:
Anything you owe: mortgage, credit card, etc. that is not at a fixed rate will see an increase in interest rate. Probably a substantial one. Even fixed rate cards can send you notification that they are going to raise the rate. You can keep your fixed rate only by opting out of the card. That means you would continue to make payments on any outstanding balance but you would not be able to use the card going forward.

The already struggling economy would see several hits.
Businesses would not be able to take out new loans at the same rate. It would cost them much more money and inhibit their ability to grow.
People considering buying a home. May have been preapproved based on THEIR credit and their income for 200K at five or six percent. Now, because the cost of borrowing goes up in general the can only get a loan at 9 or 10 percent. The total amount that they can now borrow (because of the increased monthly cost of the interest) is now reduced to 170K. So, that house they were going to buy is now out of their price range.

So, more houses will sit on the market or have to be reduced in price. We have already seen how the housing industry infected the whole economy. Imagine it getting worse. Much worse.

There are many other fallouts, mostly foreign and at a higher level than an average Joe cares about.
But, if you are starting from a zero base of understanding this should help get you into the conversation.

Also, you should know that I wanted to find reasons default would be okay. Philosophically I am sick of everything that has been going on and kind of crave the reset. So, I thought about it for a long time. (Posts wondering if it would be okay to default are here, by me, on ATS) and decided there was no way around it. Default is a disaster.

The debt ceiling must be raised.
And then we need to get our house in better order.

reply to post by DerekJR321


In theory money has to have a support (usually gold), you can create money that amounts to the gold you have. Some "poor" countries create money based on the reserve they have of dollars and euros (so when the dollar fell so did their reserve).

My question is simple all countries have debt that amounts to more than 60% of their income (so a lot). Who in hell had that kind of money to give ? Why aren't they in the top 100 most rich people in the word ? This is the issue with the current system.

The "Debt Ceiling" is an amount over which the country can't borrow anymore, at this point either the taxes have to go up or it has to sell some of the things it owns (land, oil, etc). Soon even if the US raises the taxes etc the interest for the debt will not be covered. Some sort of point of no return.