Debt Ceiling Delusions and Dollar Difficulties

Read:  Harvey, Irma, Gold and Bad Options

MD: Notice that  Deviant Investor represents himself as a “non-traditional perspective”. And then he rejects us in moderation for being “unorthodox”. Go figure.

Here at MD we have no illusion about what money is. We see all governments as just traders. And we see all governments for the irresponsible traders that they are … they never deliver on their money creating trading promises … they just roll them over … and that’s just plain counterfeiting.

Now let’s point out where the Deviant Investor just plain “doesn’t get it”!


Guest Post from Clint Siegner, Money Metals Exchange

Those who paid any attention to the financial press last week saw the following narrative; President Donald Trump betrayed Republicans by cutting a deal with Democrats Nancy Pelosi and Charles Schumer. They agreed to punt on the borrowing cap until December and spend $15 billion for hurricane relief.

MD: So what? The borrowing cap is an illusion. It does not exist in practicality. Every time they pretend it does, it results in a paid holiday for government workers … and them moves right on up.

Americans are supposed to conclude that Trump is flip-flopping, and that Republicans aren’t responsible. Dig just a little, and you’ll find only one of those things is true.

Trump is flip-flopping, no question about that. The president campaigned on promises to honor the borrowing limit. This tweet from 2013 is what candidate Trump had to say on the matter: “I cannot believe the Republicans are extending the debt ceiling — I am a Republican & I am embarrassed!”

MD: Man is this guy deluded! He’s recognizing Republicans (presumably in contrast to Democrats), admitting to be one, and is embarrassed by what Trump is and does? Surely he jests!

But any implication that Republican leaders in Congress actually oppose more borrowing is patently false. Republicans in Congress overwhelmingly supported the deal. It was passed in the House with a vote of 316 to 90. The Senate voted 80 to 17.

MD: Leaving me with “Trump is Flip Flopping” is the truthful statement?

Some who voted in opposition likely only did so for the sake of appearances. Others thought the president and Democrats did not go far enough. GOP leaders Paul Ryan and Mitch McConnell wanted a deal to suspend the borrowing cap for much longer than the 3 months they got.

Make no mistake – lots of Republicans share the commitment to unlimited borrowing with the President and Democrats.

MD: I agree. They should have unlimited “money creation” privileges as should all traders (within principled reason … you shouldn’t be able to create money to build a General Motors from scratch). But, as with all irresponsible traders, they should have an interest load commensurate with their propensity to default. In their case, that is 100%. Therefore, they effectively cannot create money (the borrowing metaphor is a fiction). Institute a proper MOE process in competition with theirs, and the debt ceiling no longer moves in any direction but down … until they prove themselves to be responsible traders … which of course they never will do.

At least the currency markets seem to have gotten it right. Last week’s decline in the dollar may be a recognition the debt ceiling – the final pretense of borrowing restraint – will soon be going away. The sooner investors at large arrive at this conclusion, the better it will likely be for owners of hard assets.

MD: With a proper MOE process (i.e. real money) there is no such thing as a “currency market”. The “real” money (best denominated in HULs … Hours of Unskilled Labor” never declines or increases. In a proper MOE process, money is every bit as hard as gold (but easier to trade with). Gold isn’t money at all … and never has been. It’s just a clumsy and expensive and inefficient stand-in for real money … it’s just stuff like cement blocks are stuff.


Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

Thanks to Clint Siegner