## Wednesday, July 06, 2011 ... /////

### Should America raise the debt ceiling?

Jon Stewart answered the question in the simplest possible way: he looked into the two future parallel worlds according to Everett's Many-Worlds Interpretation where the debt ceiling was either raised or not:

Via A.A.

More seriously, if America doesn't raise the debt ceiling, it's likely that it will technically go bankrupt for some time in early August. The rating agencies will lower the rating - one of them may even change AAA to D for a little while - and the rating is unlikely to return to AAA. That should be true for all agencies. Of course, most investors won't care.

The short-term culprit of the lowered rating will clearly be mainly the Republicans because they will have refused to raise the debt ceiling. However, from the viewpoint of the eternity, the long-term culprits would mainly be the Democrats because they really wanted to direct America's public spending in the Greek direction. That doesn't mean that the Republicans have been quite innocent.

The temporary default could ultimately be healthy for the U.S. - as a tool to fight against the moral hazard. When a party wants to spend too much, it's at risk that the other party may guarantee that this will lead to some trouble.

#### snail feedback (1) :

First, the US is technically bankrupt if standard accounting methods were to be used. Total federal debt plus unfunded liabilities stand at more than $100 trillion and are growing at more than$5 trillion per year. Try and do the math and figure out how a \$14 trillion economy can handle those obligations.