There is a limit to how much the United States Treasury can borrow.
Sentiment: NEGATIVE
It's very difficult to explain to a normal working citizen the implications of what $18 trillion in debt means and what it means when the Federal Reserve buys the U.S. Treasury bonds to finance our loss every month.
To finance this trade deficit, the U.S. has to borrow from the rest of the world or sell American assets like stocks, businesses, and real estate to the rest of the world.
All the Federal Reserve can do is make loans against collateral.
I can tell you if you look at the polls, Democrats, Republicans, Independents, they do not think we should increase the debt limit.
A short squeeze could happen with the U.S. dollar if lenders suddenly forced debtors to pay in cash.
There's no debt limit in the Constitution.
There are limits to monetary policy.
But the debt limit obviously is something that needs to and will be passed. That is not inconsistent with a process and a belief that we have to get significant deficit reduction.
Now we are raising the debt limit 3 times, up to $8 trillion, so that our children and our grandchildren will have to pay for the cost of our expenditures.
The U.S. has a law on the books called the debt limit, but the name is misleading. The debt limit started in 1917 for the purpose of facilitating more national debt, not reducing it. It still serves that purpose. It's unconnected to spending, hurts our credit rating and has been an abject failure at limiting debt.