America's Sterling Monetary System

The debt limit talks/arguments/rabid war in Congress has been amusing, disturbing, and frustrating to say the least. But, I've been thinking... this whole concept of needing to raise the debt ceiling seems rather ironic.

If the money you spend is based on something you don't have, and not even something that will ever exist... what is more outrageous than that you should never break trust with what you don't have, with a fake trust? So, we need to raise the debt ceiling and say to our creditors, "No, we don't plan on paying you back yet. In fact, we're going borrow more because we have authorized ourselves to do so."

So, the way this works (and if I get my facts messed up, don't hesitate to try and correct me) is that the Treasury decides that it needs more money, so it sells these things called bonds or securities to the Federal Reserve, a private bank. These bonds represent something I guess, at least I think they do in theory. But, I really don't know.

Anyway, the Federal Reserve says, "All right, I'll take those bonds.", and gives the US Treasury X amount of money. Now, the Federal Reserve doesn't mind paying for the bonds because, well... it has a limitless supply of money. Those things you stuff in your wallet and are perhaps pinching a little more in this strained economy... they're called Federal Reserve Notes, and that is what the Federal Reserve pays the Treasury for their "valuable" bonds. When they agree to buy more bonds, they just print off another batch of "money" notes. What this means is that the US Government can get as much money as it wants from the Federal Reserve, as long as it has bonds to sell.

Now, the problem. The US Treasury is going to reach the debt limit soon and oops... it won't be able to sell any more bonds! No worries! We can just raise the debt limit, and voila! we have more bonds to sell. Just. Like. That.

But, unfortunately (depending, of course, on who you talk to), many Republicans don't feel like raising the debt limit anymore... or they at least won't do it unless we drastically cut spending and NOT raise taxes. Oh, and they want this Constitutional amendment for ensuring balanced budgets.... never mind the fact that Congress hardly pays attention to the Constitution anymore.

I don't know, I just kinda found the idea that Congress needs to allow itself to sell more thin air amusing. Also, if defaulting (not paying bills, interest payments, etc.) is bad faith with our creditors... how is borrowing more, to pay our debts (but borrowing more than we pay, nonetheless), good faith on credit?

I haven't really made up my mind whether the government should or should not raise the ceiling. I mean I am one for standing on principle, but it seems like a kind of artificial limit. Nothing more arbitrary than Congress has already done.

The reason so many conservatives are against this, I believe, is that they feel that now should be the time when America should turn from its fiscal irresponsibility. It's kind of obvious that both Republicans and Democrats have been trying to use the issue politically, though. They just can't keep their eyes off of next year's elections.