Thursday, January 28, 2010

Senate Approves Increase in Debt Ceiling

Washington Post reports that the Senate has just approved a $1.9T increase in the Federal Debt Ceiling.
The Democratic-controlled Senate has muscled through a plan to allow the government to go a whopping $1.9 trillion deeper in debt. The party-line 60-40 vote was successful only because Republican Sen.-elect Scott Brown has yet to be seated. Sixty votes were required to approve the increase. The measure would lift the debt ceiling to $14.3 trillion. That's about $45,000 for every American.

This last sentence is interesting. The Post has done the math for us and is perhaps implying that somehow each of us "owes" $45k to present and future holders of Treasury Securities, which is far from the truth.

The debt demagoguery continues unabated in the MSM, but the increase in the ceiling may take some short term constraints off of the rate of Federal spending.


mike norman said...

Good post!

MortgageAngel said...

Extremely tweetworthy!

mike norman said...

Expect the rhetoric about a U.S. credit downgrade to escalate sharply.

bubbleRefuge said...

Mike, have you figured out a play book for shorting us treasury credit default swaps since we know there is no way for us treasuries to default from an economic perspective. Although, from a political perspective I'm not sure this is true.


Matt Franko said...

Yeah Mike,
Per JCs comment: I still remember that trade you outlined on your show whereby you somehow get long Treasuries after a US sovereign downgrade by the ratings agencies...that would be SWEEET!

bubbleRefuge said...

Matt, that could be hard because treasuries and treasure futures are going to be more sensitive to fed policy than to ratings agencies.

mike norman said...


Exactly! That's why you buy them after a credit downgrade (once the knee-jerk selling has abated).


mike norman said...

The public doesn't "owe" $45,000 per person, the public "owns" $45,000 in Treasuries, which are assets and comprise a portion of their wealth as defined by: Assets - Liabilities = Net Worth.