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The real story isn’t the debt ceiling. It will be raised or it won’t. In any event, the Federal Government is already way over its head in debt.
Raising the debt ceiling now is like throwing another few squirts of gasoline on the bonfire. Sure, it will make us feel warmer, but we’re already on fire.
Regardless of what President Obama says, Social Security checks will go out in August, even if Congress doesn’t vote to raise the debt limit.
He’s right though: eventually, the checks won’t be in the mail.
In the future, the US Government will look austerity square in the eye, and Social Security will find itself on the chopping block.
If you’re interested in telling the future, you only have to adjust your telescope to look across the Atlantic Ocean.
The United States is armpit deep in the same river of debt that’s now about nostril high in Europe.
What’s happening in Europe right now should make you sit bolt upright in your chair. They said the Euro would be the next great currency. They said that it would provide safety in numbers. It would spread the wealth all around the Euro-zone and create a utopia of freely moving capital and citizenry.
All of a sudden, the notion of too-good-to-be-true is butting heads with too-big-to-fail.
Unfortunately, bailing out every indebted country around the world would take too much political capital (to say nothing of real capital).
Printing dollars to solve the world’s problems doesn’t really solve them. It just moves them to another side of the ledger.
And if you hold dollars, you are the other side of the ledger. The Federal Reserve incrementally steals the value of your dollar holdings every time it bails out some bankrupt institution.
Already, George Papandreou is trying to finagle a bailout from the United States:
"Papandreou, who met with U.S. Secretary of State Hillary Clinton in Athens on July 17, said there was "direct interest" from the U.S. in solving the debt problem and that its experience in Latin America and its involvement in the IMF may aid Europe in dealing with its "new" problem."
It shouldn’t come as a surprise. After all, if we can’t let AIG (NYSE: AIG) take a dive, how could we let the Euro dissolve?
But if you want to look into the future, take a look at what Greece’s Prime Minister George Papandreou had to say yesterday, because President Obama, Timmy Geithner or Ben Bernanke is likely to say something similar in the next year or so: "It could be a make-or-break moment for where Europe is going."
Make or break? The Euro is already clearly broken. The dollar will follow in its footsteps – whether we raise the debt ceiling or not.