You can be forgiven for confusing the ongoing debt ceiling debate with the 2011 debacle. Then as now, the debate points of contention were serious issues but the dialogue quickly descended into self-destructive inanity on both sides of the aisle.
In August of '11 America gridlock led to the U.S. credit rating was downgraded and markets were plunged into temporary chaos. It proved to be a buying opportunity but in reality this time might be worse.
According to Peter Schiff, CEO of Euro Pacific Capital and author of the book The Real Crash: America's Coming Bankruptcy, the best that can be said about our current situation is that we don't have to worry about another downgrade. The government made sure of that. "They already sued S&P (MHFI) for downgrading the U.S. last time," Schiff says, referring to a government lawsuit that Standard & Poor's claims is indirect punishment for taking down U.S. credit. "Nobody is going to downgrade the U.S. Treasury, no matter what."
Not that it matters to Schiff. The foreign nations buying US debt recognize a bad deal when they see it. Once those customers realize that Treasury paper is the equivalent of junk regardless of the official rating the buying will dry up and disastrous endgame will begin.
Count Schiff among those firmly believe the debt ceiling shouldn't be raised at any cost, even it means shutting down the government. Constantly raising the debt ceiling to, in effect, live beyond our means is the root of America's credit problem. Kicking the can down the road only makes the day of reckoning worse.
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