The Seinfeld fans out there will remember the episode where George Costanza decided to just give up. Rather than watch his weight or care about his appearance, he decided to wear sweat pants all the time and skip other necessary hygienic activities. Well the US has just decided to stop shaving, bathing, and has purchased the largest pair of sweatpants the world has ever seen.
While we're all celebrating the end of the government shutdown, there is one bit of information that I haven't seen reported anywhere in the news. A provision (named the Default Prevention Act of 2013) is buried within the Continuing Appropriations Act of 2014 that gives the President the ability to unilaterally waive the debt ceiling limit. Although Congress can override the President's move to lift the debt ceiling entirely, it would take a 2/3 majority in both Houses of Congress to block the action. That just would not be possible for all practical purposes. Whether you are a Republican or Democrat (or, like me, have little use for either), this provision has chilling implications.
When I first saw the news that a deal had been reached, I spent time scouring the Internet to see if I could find out the new debt ceiling limit - i.e. how much more deficit spending could occur between now and February 7, the next drop-dead date. I could not find any numbers. Now I know why.
It looks to me, based on reading the Bill, that the Senate slipped the provision into the legislation at a late stage in the game, when they realized that the Republicans had caved in and the world was begging the government to avoid default. I would bet a lot of money that most if not 90% of the Congressmen who voted "yes" on the Bill didn't even know that the provision was in there.
In addition to this, there is no specified limitation on the amount of debt that can be issued between now and February 7th, when supposedly Congress reconvenes to vote on extending the debt ceiling limit. But now it appears as if February 7th is a meaningless date. So now we have legislatively officially entered the realm of unlimited debt, unlimited QE, and interest rate and dollar instability.
In essence, while most people feel a sense of relief over the passage of the Bill enabling to government to pile on even more debt, the cold reality is that the legislation is a ticking time bomb for the U.S. dollar and it sets up the next stage of systemic collapse (or reset, choose your poison).
The truth is, the U.S. political and economic system is now akin to a runaway freight train in which the brakes have failed and it's headed toward a gorge where the bridge has collapsed. At this point, It would take a 30%-40% contraction in GDP to restore the annual budget to balance. Five years ago it would have taken a 20% GDP contraction. At the end of 1999, it would have required a 10% GDP contraction. As time goes on, we are accelerating more rapidly from a point where we could have fixed this problem with a minimum of pain. Our leaders have simply decided that it is better to just give up on fixing the problem and are hoping the charade lasts until they're retired and gone.
