The Debt Ceiling, An Update

As we near the Geithner deadline of Aug 2 for a debt ceiling increase, it appears the two political sides have defined their positions clearly, yet not begun to compromise and move towards a mutual agreement. This delay does not surprise us in the least bit, and appears on track to meet our “Human Nature” defined time line.

Our thoughts on the time line:

Just as the NFL agreements went a few days over the line in the sand, we would not be surprised to see our Aug 2 deadline come and go without an increase. We do feel strongly an increase will come sooner rather than later.

So what happens if an agreement is not met?

If an agreement is not met and a default (highly unlikely in our opinion) occurs, while no one knows exactly what would happen, we think business as usual would transpire and upon the first medicare and social security shortfall in payments (a few “calls to your congressman” would be promptly made), politicians would be quick to resolve this issue. Money in the system will continue to move, leaving banks free to lend, gas stations free to pump, and water to flow into our homes.

What are the long-term effects?

The US political policies are unique to many foreign countries, and certainly not without problems, however, debate (sometimes heated) is the method of compromise.  This “Human Nature” delay, will cause confusion among some of our trading partners.

The credit rating agencies have now rattled the sword enough, in order to save face, we believe, they will be forced to lower our credit rating which may lead to longer term higher rates, but not immediately.

We believe that the conversation this debt ceiling raise has created is a good thing. The US economy is nearer to an air craft carrier (very slow to turn) than a fighter jet, and the discussion that has ensued, and will continue, is an excellent step in the correct direction for becoming a more financially stable economy and country.

In closing, we believe the sky is not falling, and this will pass, along with the many dramatic negative possibilities, but might be a step in the right direction.

Have a Great Day!


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