Why the Debt Ceiling is Realistically Irrelevant

Here’s an important point on the debt ceiling debate by Vincent Reinhart who points out that, if we actually fail to raise the debt ceiling then SOMEONE has to break the law in the USA because the laws that are currently on the books make it impossible not to.  He explains:

“If the Treasury is unwilling to stretch the definition of extraordinary measures, on the day that the Federal Reserve predicts that the Treasury will run out of cash in its account and the Treasury is bound by the debt ceiling, it suspends all payments and awaits instructions from the Treasury. As a result, the government’s principal economic officials will face the prospect of violating one of these three laws:

1. The Second Liberty Bond Act of 1917 that establishes the debt ceiling;

2. The Federal Reserve Act that prohibits the Fed from lending directly to the Treasury; or,

3. The 14th Amendment of the Constitution that holds that the debt of the United States government, lawfully issued, will not be questioned.

They have to break a law. “

Basically, someone has to break the law here if the debt ceiling isn’t raised.  I don’t know precisely how this would all play out, but my guess is there’d be strength in numbers by having Jack Lew ring up Ben Bernanke and exercise the “exigent circumstances” clause in the Fed act.  The Fed would buy new bonds directly from the Treasury which would keep the government from defaulting and would keep the Treasury from breaking the 14th Amendment.  The Federal Reserve would come under fire for breaking the Federal Reserve Act, but the exigent circumstances clause would likely give Ben some wiggle room there.

The bottom line is, no matter what happens someone has to break a law so if someone’s going to be an adult and avoid breaking the law PLUS crashing the global financial system I am pretty sure that the obvious choice is to break the law and NOT crash the global financial system.

In other words, by failing to raise the debt ceiling the US Congress puts the US Treasury in an impossible position where someone is forced to act like an adult just because Congress can’t.  And that means this inane debate is really an unrealistic and useless waste of time because once push comes to shove the Treasury has to act or get someone else to act because they break the law by not acting.  And they will act.  Because there’s no realistic alternative.

NB – Oh, and even if Ben Bernanke was found liable of breaking the law here I am pretty sure there’d be a nice phone call before all of this goes down that goes a little bit like this:

Tsy Sec Jack Lew:  “Ben, I’m about to break the law here if we don’t do something.  Oh, and we’re about to crash the global financial system.  How about you enact the exigent circumstances clause and just fund our account?”

Fed Chief Ben Bernanke: “Sure, but I want some guarantees that I am not going to be the only one on the hook here for this.”

Lew:  “Sure thing.”  [Dials in President Obama]

President Obama: “Hey dudes, how can I help?”

Bernanke: “If I am going to save the world AGAIN, I need some guarantees I won’t go to jail this time around.  Can you guarantee that?”

Obama: “Of course.  Your stock market rally saved my skin on more than one occasion.  I’ll put you at the top of the pardon list.”

Bernanke: “Swell.  Oh, and I want lifetime beard groomings also.  This thing doesn’t keep itself looking this good all by itself.”

Obama:  “Done.”

Lew: “Great, now someone phone down to those clowns on the floor of Congress and inform them that their little games are pointless.”

Edit: this post previously stated that Vincent Reinhart had published the Carmen Reinhart paper of the issue of government debt. Sorry for the error.


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Cullen Roche

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services. He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance and Understanding the Modern Monetary System.

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  1. Love the post…Isn’t it amazing how sensible fictional government officials can sound.

  2. “He’s taken a lot of flak more recently as the research was shown to be somewhat shoddy”

    -What was shoddy about Reinhart & Rogoff’s work? Im aware of the University of Michigan paper that challenged some of the assumptions, but the end result was the same……debt/GDP in excess of 90% has in fact historically slowed GDP growth. The difference between the two papers was less than a percentage point if i recall correctly and as i stated before…the basic conclusion was upheld.

    As an aside, dont you think its a bit silly to proclaim that a debt ceiling is irrelevant? I realize that MR takes the MMT view that debt is irrelevant etc. etc. but history says otherwise. Basic commonsense would tell us that if a gov’t has a history of borrowing too much then their debt deserves a commensurate risk premium…and if they borrow far beyond their ability to pay (in like kind) then investing in their debt becomes a poor decision……..even if they have a printing press.

  3. This assumes BO won’t try to force the GOP to cave, knowing that the polls will likely work against them if they don’t or perhaps even if they do! Very ironic, the “Party of No” up a creek because BO says…”NO”. Funny. Turnabout is fair play, yes? Possibly the only brilliant move BO ever made, unless, of course, it results in default. I know, I know, they (meaning all of them) are not that (collectively?) stupid, and I tend to mostly agree. Which means that I have a bullish angle on the markets. However, that bullishness is not 100% since some of these actors (clowns) appear to be real idiots. One unknown: How many high cards do the people with the money have and what are they thinking? No sure things here IMO.

  4. If it comes to this, let’s hope the lawyers at Treasury and the Federal Reserve see it the same way and break with conventional wisdom that says this is a problem only Congress can solve. Then, lets hope this does not become the new normal.

  5. You know Cullen – this is actually a very reasonable solution. I think it could definitely pass. I don’t even think Bernanke would be breaking the law. I think he could just use the exigent circumstances clause and be fine.

  6. Cullen wrote:

    “Vincent Reinhart made waves a few years for the paper that was later used by the pro-austerity crowd to promote the idea that high government debt levels were dangerous to growth.”

    Ummm… No.

    That was CARMEN Reinhart who wrote the paper on debt (with Kennth Rogoff).

    Vincent is her husband.

  7. billiejones,

    There’s a lot of harsh and well deserved criticism of Reinhart and Rogoff’s paper on this subject. Google.

    “debt/GDP in excess of 90% has in fact historically slowed GDP growth…”

    What’s important is causation, not correlation. If it’s true that historically debt/GDP in excess of 90% has in fact been ASSOCIATED with slowed GDP growth…” …. it may simply be that when economies worsen, deficti spending increases (debt goes up) and output decreases (GDP goes down). That’s an association, or a correlation.

    What’s the cause? Isn’t it the worsening economy (fall in GDP) that leads to a increase in deficit spending via automatic stabilizers and stimulus (rise in public debt) that leads to a higher debt/gdp ratio?

    p.s. sounds like your stuck in Gold Standrd thinking

  8. You can break the 14th Amendment and not break the law. This is because the Constitution is not law. Law-making is a power the Constitution granted to Congress in Article One, Section 8:

    “To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.”

    So unless there is an actual statute enacted by Congress that mirrors the 14th Amendment, the 14th Amendment is irrelevant to the debt-ceiling discussion.

  9. The effect of all this insanity, coupled with all the insanities of the last 15 years (from the Iraq war on false premises to QE which damaged all the economies outside the US) is to further mine the credibility of the US which is now more tha OPENLY QUESTIONED. The role of the dollar as the reserve currency is living his last years. The dollar will not be replaced by another currency, a basket is more likely, because it’s not necessary to have a reserve currency when all you have to do is to settle bilateral trading. Why owning all those foreign reserves when country A buys 100 from B and B buys 95 from A ? All you need is to settle 5. Now there is a 100 + 95 dollar flow which is totally not necessary, just a huge waste of money for the producing countries to the benefit of the big anglo/american banks. Dollar is headed to an extreme devaluation in the next decade and that’s the reason because an american citized can’t open a bank account abroad. Understanding the monetary system will not help you.

  10. This leaves out important questions. Which prison gang is Bernanke going to join?

  11. The debt ceiling is stupid, at least in its current form (it would have been less stupid if it was adjusted for inflation and population growth).
    That said, the article’s claim is false. The Fed is not the only agent that can buy the new debt. A commercial bank can, in which case no law is broken. Treasury runs an auction for new debt exactly to the account of old maturing one. Commercial banks buy the newly issued T bills and the proceeds repay the old bondholders (could be the same entities, no matter). No default, no beach if ceiling, no direct funding by the Fed.

  12. It was UMass, not UMich. and the error had a discrepancy of 2.3% growth.


    “How big is this mistake?
    Reinhart and Rogoff wrote in their 2010 paper that average annual growth was negative 0.1 percent in countries with episodes of gross government debt equal to 90 percent or more of GDP between 1945 and 2009…. According to the UMass scholars, the “corrected” number is positive 2.2 percent—which means GDP still grows, even when debt levels are very high.”

  13. jswede,

    You are right, I was writing from memory and clearly my memory was very hazy. I would point out however that the discrepancy largely depends on the assumptions (as with everything…garbage in garbage out). depending on which data points you select and how they are weighted the discrepancy can shrink a bit. The U Mass paper didnt make many adjustments in their data if i remember correctly. The important point however is:

    “In defending their work, Reinhart and Rogoff pointed out that the University of Massachusetts study also finds “lower growth associated with periods when debt is over 90 percent.”

    – Bloomberg article

  14. JK,

    I wouldn’t classify myself as a gold bug although i do believe in allocating to alternative assets with a potion of the portfolio. I’m hesitant to believe that we have finally created a system in which monetary policy is capable of solving everything, debt doesn’t matter and all problems can be solved as long as a country has a printing press and isn’t constrained by currency pegging etc. History has shown time and time again that this time is never different. I have tried to study MMT and MR but frankly the theories contained within smack of technicalities and give the impression of “scientists” who have neglected to read a history book.

    Ultimately in order to fully subscribe to MMT or MR or Neo-Keynsianism or any other economic THEORY…..one has to believe that economics is a science and this time is different. In an ACTUAL science ALL scientists agree on certain fundamental properties i.e.: water boils at 100 degrees celsius. Yet in economics there are several VERY different theories that all attempt to explain the same phenomena. Obviously they aren’t all correct.

    As a result, I find it foolish to subscribe to any one theory…they all have valuable attributes but none is the gospel. The one thing that i do like about austrian econ is that it doesn’t require massive leaps of faith …..mostly it is just common sense.

  15. The investors will determine whether the debt “lawfully issued” will be questioned or not. NOT some silly amendment issued by Congress.

  16. I wonder how the (blatantly political) Supreme Court would rule? Are we headed to the Banana States of America?

  17. billiejones,

    In resposne to: “Ultimately in order to fully subscribe to MMT or MR or Neo-Keynsianism or any other economic THEORY…..one has to believe that economics is a science and this time is different.”

    What do you mean “one has to believe that economics is a science” …?

    Science is the ability to make hypothesis, make observations, gather evience, and determine base on observations and evidence whether or not the hypothesis is correct.

    Can we be ‘scientific’ about economics? I think so.

    Does that mean economics follows laws like gravity or chemical reactions? No.

    Because economics is a social science with human actors I don’t think we’ll ever be able to pin down perfect policy prespecriptions that are guaranteed to work. Though with that said, we can do better than nothing.

  18. A better point is to determine if there is a causal relationship between the debt/GDP and growth. And it turns out, there is: debt/GDP increases as a result of poor growth.

    A Note on Debt, Growth and Causality
    Arindrajit Dube


    Abstract: This note documents the timing in the relationship between the debt-to-GDP ratio and real GDP growth in advanced economies during the post World War II period using the Reinhart and Rogoff dataset. I first show that the debt ratio is more clearly associated with the 5-year past average growth rate, rather than the 5-year forward average growth rate–indicating a problem of reverse causality. Indeed, there is little evidence of a lower growth rate above the 90 percent threshold when using the 5-year forward average growth rate.

  19. “…and determine base on observations and evidence whether or not the hypothesis is correct.”

    Good luck with that. Good luck even trying to isolate the supposed effects of a policy prescription or trying to do so within any reasonable time frame. You are fooling yourself if you think the phenomena from a particular policy can even be measured with any accuracy.

    Take Bernanke’s recent monetary policy for example…..how will you measure it effects in order to determine whether the “hypothesis was correct”? Say there is inflation in 20 years, should we attribute it to Bernanke’s monetary policy? If so how much? Should we attribute it to the treasuries deficit spending? Should we split it down the middle if we assume that Bernanke’s policy enabled treasury policy? Is twenty years a long enough timeline to gather all of the data for a particular policy and measure it?

    There’s no harm in trying….but as with subscribing to the “economics is a science” viewpoint the danger is that you are convincing yourself you understand something that you actually don’t. I don’t understand either if it makes you feel any better…..but the difference is that I am aware that it CANT be understood.

  20. I don’t know about common sense and no leaps of faith regarding Austrian Econ. It seems very faith based to me. It is the opposite of common sense, it is based around articles of faith that no one is allowed to question and are conveniently impossible to measure (hence their skepticism of math and measurements). I’m not saying their aren’t some valuable things to learn form Austrians I’m just saying they are MOSTLY faith based. They also seem to find austerity to be the answer to everything

  21. The issue about the law and the 14th amendment is which ones are enforceable, as Pres. GW Bush said, the Constituion is a piece of paper, and as Jim Rogers said, for a large chunk of its history the USA did not have the rule of law.

    Enforceable here means which ones the Republicans can use to start an impeachment of Pres. Obama or one or another official, as for most of the relevant laws the question is who has standing to bring action; for example if the Fed breached the Fed Res Act, who has standing?

    In practice, since the Senate is majority Democrat, impeachment has no chances, but it could still provide for a lot of politically helpful mud slinging for the Republicans.

  22. billiejones,

    I believe that our economies are primarily demand driven. Business is all about sales. If a business is not selling, then they are going out of business. Businesses do not hire employees for fun. Employees are a real financial cost. From all that, if we want to maintain low unemployment, then we need to keep businesses busy. Add into the mixture that our economies are driven by credit/bank loans, and we’ve got a situation that has a definite inflationary bias. Continual deficit spending is essential to prevent frequent debt deflations.

    Inflation in 20 years? Let’s not worry about it too much. Sure, we shouldn’t be reckless with money creation and have no regard for future inflation, but we also should tolerate long periods of high unemployment because we’re worried about a little bit higher inflation in the future.

    We can treat economics somewhat like a science. We observe our actions and see what happens. Try to understand why we observe whatever is happening as a result.

    For example, Cullen has talked a lot about why QE hasn’t been an effective policy tool. If you understand what QE actually does, it’s not hard to understand why it has been an effective policy tool. This is being “scientific” about it. Observe what happens and explain why. Continue to learn and build on that understanding. etc.

    Seems to me you have a (so far) unsaid belief in “efficient markets”. And if you don’t, i.e. “unemployed? too bad for them!”… then I find your economics cruel.

  23. Sorry, above should say… “but we also *shouldn’t* tolerate long periods of high unemployment because we are worried about a little bit higher inflation in the future.”

  24. I just don’t see how the 14th amendment guarantees that we will never default on our debt. If we got to a point where we couldn’t pay, then we simply couldn’t pay. That’s not the case, but the 14th amendment states that debt to put down rebellion was valid and those in support rebellion aren’t. That simply isn’t applicable to our current debt.

    The President, to faithfully execute the laws of this country, must default on our debt.

  25. The subtext is the players…the predator’s ball:

    Lew, a rent taker via financialized student loans:

    “At the same time, you’ve had an increasing financialization of the organization of the schools. University presidents, their cronies and middle management with no-show jobs have proliferated. The top administrators, people like the newTreasury secretary, Jacob J. Lew, was at NYU and and there is now a big to-do over $900,000 salary (even more than the university president), essentially to make sweetheart deals with banks to make exorbitant student loans to finance the highest tuition rates in the country. Lew then got $700,000 in severance when he left voluntarily to cash out with an even-higher paying job at Citigroup.”

    Obama, an apologist or useful idiot?

    The basic script is a fairy tale that balancing the budget in the face of the $13 trillion in Wall Street bailouts requires cutting back spending elsewhere in the economy. The Federal Reserve and Treasury were able to create this money for the banks, but pretend to be unable to do the same for the projected $1 trillion in Social Security deficits that may or may not materialize a generation from now. New wars in Syria and elsewhere can be funded by money creation, but not social spending programs – to say nothing of financing public infrastructure costs with public money creation rather than by recourse to Wall Street. This is the great policy asymmetry of the Obama Administration’s plans to use the economic crisis as an opportunity to cut and ultimately privatize Social Security as the capstone of a financialized Public-Private Partnership.


    Yes, we are a sovereign creator of money, especially when we issue TBills to let the banks loan money into existence. All of our money then has the debt problem, even if pushed off balance sheet for the future.

    The question then becomes, where does the new debt money flow. In the case of post industrial financialization, it flows to bond holders and corporate elites, who then “hold” the money and extract rents from the productive.

    The bigger problem is not that we have the ability to be a sovereign issuer, but it is money path flow and type. The segregation of the economy into an oligarchy of financial plutocrats will lead to revolution.

    Its most interesting that all of the players are either predators or dupes.

  26. You can satisfy all 3 laws that you listed by prioritizing bond payments ahead of other government expenses. They have already done this.

  27. I would not buy a Treasury bond that was issued in violation of the debt ceiling. I would expect that such a bond would be ruled by a court to be illegal, and thus null, void, and unpayable. A charitable contribution to the Government, if you will. Cullen is probably right in that only the Fed could take the huge risk of buying such bonds – and would have to buy them directly from the Treasury. Even a Primary Dealer could not take the risk of buying them and immediately selling them to the Fed, because a court could claw back the money they were paid.

  28. A court would likely rule the new bonds to be illegal, null, void, and unpayable if the debt ceiling were exceeded. A huge risk for a bond investor – worse than buying E-rated junk bonds!!!

  29. There is also the trillion dollar coin option, which has the advantage of being legal. Obama’s excuse that the Fed would refuse the coins doesn’t pass the smell test, because a determined president would make the Fed take them, at the point of a fixed bayonet if necessary. There is a time problem with the TDC option, though. If Obama wanted to do trillion dollar coins, the Treasury would have to follow the notice and comment periods of the Administrative Procedures Act, which means that a notice should have already appeared in the Federal Register. They could already have had test pieces in their vault in secret since 2011, but to do things legally they have to publish proposed rulemaking in the Federal Register sufficiently far in advance of issuing the coins. The absence of such notice tells us they won’t be minting trillion dollar coins anytime soon.

  30. Cullen is assuming that Obama wants to avoid default, an assumption I believe is false. I think Obama wants default and wants an epic market crash. A mega-crash would give him the excuse he needs to act forcefully against the Republicans, and I think this is what he wants to do. Suppose a default made the DOW drop in half and immediately took down a few TBTF banks. Obama would immediately use the Patriot Act to declare the Republican Party to be a terrorist organization, which would ban the party forever, he would then arrest the GOP House members and then hold special elections in each of their districts in which only Democrats could run. The military and the DHS would “manage” those elections, just as was done in Reconstruction. Of course this whole scenario depends on an epic crash, which I think is much less likely than the bankers are saying. If there is a default and the markets largely shrug it off, Obama will be a very frustrated man. He might even break his golf clubs.

  31. If we ever gain the ability to send information backward in time or exchange info with alternate timelines, it will be possible to do experiments that involve alternate histories.

  32. How can you assume that BO doesn’t want a default? I think he does, so he can blame the Republicans.

  33. Eventually, perhaps, but not immediately. Hyperinflation will result when the political class realizes that its spending power is unlimited, and starts spending like there is no tomorrow. As long as the Appropriations are not increased there should be no more inflation than there is now. The dollar might drop a bit from the psychological effect, but that should be temporary. Once we get drunken sailors in charge of spending though, all bets are off.

  34. The most likely scenario is some kind of face-saving deal where BO throws the GOP a bone in the form of “future spending reductions”. Not a big chance of anything dramatic, other than the last minute timing. Try to enjoy the show, what else can ya do? Besides buying a few puts just in case.

  35. If they can make trillion dollar coins the political class will all realize that their spending power is unlimited right away. There would be no more push to cut anything. Austerity would be out the window. Drunken sailors would be in charge. My guess is less than 1 year after the first trillion dollar coin.

  36. Yep. There really is a debt limit,although our “advanced” economic thinkers can’t understand this. Thanks for this post.

  37. In the short term, the “coin” money would go on to pay down debts. It would vanish from existence as the money entered the ledger and decremented the numbers. The coin money would allow deficit spending with no counter in debt, the money would be sorely needed stimulus in the real economy.

    By contrast, QE is not stimulating the real economy, what I call the lower loop. It stimulates the upper loop of bondholders and reserve paths of banks. It is a composition change, where claims on money are traded out (asset swap) for money. The claim holders have little intention of spending on the real economy, and then go on with their “money” to look for gains. Interest rate arbitrage with the BRICS, or asset inflation in the stock market is a direct result. We can see the excess “money” swirling about the entrepot money centers of the world, and also with Casino financialization behavior where money bets against money – there is no real productive economic activity.

    In the short term, the coin money would be demand in the lower loop as it is deficit spent. It would go on to vanish as money pays off ledger debts. Eventually, new debt money would be created in too great an amount as people become debt free exuberant, and inflation would appear. Also, Congress critters would continue drunken spending thinking it worked before (due to overhanging debts), so it should continue to work.

    Allowing banks to create credit money in a bubble, and then recall it excessively is a poor way to run an economy. Giving ignorant populist congress critters the money power is equally bad. We need a real monetary authority, and it isn’t the FED. We need a fourth branch of government. Private banking corporations have shown themselves incapable and entirely corrupted..

  38. There is a saying, the only thing worse than having a central bank control your money supply is having politicians control your money supply. Historically it is really true. Once the politicians get control of the ability to make new money, the SHTF.

  39. What would 1 trillion do against $ 59 trillion of debt. It’s a very small amount of USD to cause (Hyper-)Inflation.

    “Hyper-Inflation requires Hyper-Deflation”
    “Hyper-Inflation is a political choice”

    Hugh Hendry & Robert Prechter.

  40. Greg, real budget reduction does indeed work!

    There are numerous examples..

    BTW, why is not JMK’s theory faith based?

  41. How did this comment even make it onto this thread? Shouldn’t you be at Alex Jones’ website?

  42. Can you show me a single case where the politicians actually chose hyperinflation? Like do you think there was ever a vote, “all in favor of hyperinflation raise your hands”?

    I think they chose to spend more than the taxes collected but were not planning on hyperinflation. That is just something the market does when politicians make enough other bad choices.

  43. This is clearly wrong. The Constitution is law and is actually the ultimate legal authority in that it trumps any legislative enactment by Congress. Only a few Constitutional provisions have to be executed by Congress, for example federal judicial jurisdiction.

    Arguably, in your scenario, Obama would not be breaking any laws if he is not abiding by the words of the statutes in order to honor the 14th Amendment. Under Youngstown, the President can directly disobey a statute enacted by Congress if there is direct Constitutional authority to do so, although this is a situation where the President’s executive authority is weakest. The 14th Amendment provides pretty some strong authority in this situation. This is also a conservative pro-executive Supreme court.

  44. You shouldn’t focus on spending. You should focus on (the (in)ability to continue) borrowing.

    If/When the T-bond market collapses then the US WILL experience Hyper-Deflation. After that, then and only then Hyper-Inflation is possible (!!!!), not even inevitable.

    Take e.g. Germany after WW I. Losing the war meant that Germany couldn’t repay its debt to the german public.(=bond market collapse). Then Germany experienced in 1919 & 1920 high inflation (as a result of literally money printing) but it wasn’t Hyper-Inflation. Hyper-Inflation came in 1922 & 1923 when (literally) “Money printing” went into overdrive. It was a political choice to let “money printing” go into overdrive.

    This is what Hugh Hendry & Robert Prechter refer to when they say:

    “Hyper-Inflation requires Hyper-Deflation”
    “Hyper-Inflation is a political choice”.

    And with regard to what happens in these special situations:
    “In Hyper-Deflation Credit & Debt die”
    “In Hyper-Inflation BOTH Credit/Debt & Money dies”.

    Did you ever bother to read Robert Prechter’s “Conquer the Crash” ? It’s EXTREMELY enlighting. It cured me of my “(Hyper-)Inflation” biases as well.

  45. exactly Andrew P – just like he waited until his 2nd term to fabricate Sandy Hook so that he could then use marshall law and confiscate all guns. Exactly like you nut jobs predicted it would be. LOL

  46. I can prove in October that we will eventually have no sun light whatsover based on the past couple of months of data.

    I can prove that 2 month old babies are about to die because they act just like 99 year old’s on their death beds – can’t speak, wet their bed, can’t feed themselves, etc.

    Rogoff and Reinhart found sick economies, that had high debt AS A RESULT of those sick economies, and proved that debt was the problem. Got to love economists.

  47. wow, i’ve barely visited this site in months – and Mr Market is still spewing the same nonsense. Have you never ready ANY rebuttal to your posts? Any paper from Cullen on Hyperinflations and on Weimar? Does it feel good to know nothing? Good grief.

  48. Yes, I’ve read a LOT OF rebuttals but they ALL are missing – at least – one or more points.

    All rebuttals are along the lines of ‘This can’t happen in the US’. As though the US credit market(s) is different in structure than other (foreign) credit markets.
    Nonsense, credit = credit wherever one goes.