What was the actual motivation behind the debt ceiling debate?
The odds are good that lately if you are here you are here for video game news or strategies (judging by analytics). I’m planning an update of the website layout that will help clean this place up and make it easier for people to find what they are interested in. But for now this website will continue being a jumbled mess of my thoughts. Today those thoughts come to the question of why billionaires would want the debt ceiling debacle (fun to say out loud, give it a try). What could you possibly gain as a wealthy bank owner (or investor) from the government shutting down? Is there any simple logic to it? I’m sure there are dozens of websites detailing complicated conspiracy theories. But I’m here to provide you with the simple and (in my opinion) likely reason that wealthy people were pushing hard on the Tea Party to make this happen.
That simple thing is interest rates.
You might not be aware of this but when the government wavers in its duties to pay bills or honor loans it comes under scrutiny from creditor rating groups. Do you know what happens when someone has their credit rating drop? The cost of all their loans jumps. This is actually true of governments as well. If the US drops a credit rating then all the debt they own and all the debt of all their citizens see an immediate increase in the interest rates.
Who profits from interest rates spiking nationally? Wealthy people with investments in banks and anyone with money riding on loans. The same folks that created the Tea Party that was doing this.
Rather simple isn’t it? You convince people that your concern is the national debt while hiding the true reasoning behind your actions. The balance here is very delicate however. You want to hold the government hostage for as long as it takes for the credit rating to come into question but not long enough for the government to default. If the US Government ever defaults the result will be a global economic cataclysm. This won’t ever happen for the same reason that Nuclear War doesn’t happen, but that doesn’t mean you should poke the hornets nest. Genuinely wealthy people are aware of what it would mean for them if they waited too long on these little political games and this is the reason that the government shutdown didn’t run for longer than it did.
So don’t be fooled the next time you hear about holding the debt ceiling hostage to curb our spending. It’s much less noble than that. The goal here is to cause the government to stumble (even if only slightly) on their debts and to cause a rise in interest rates. Likely for the foreseeable future there will be a little game each time the budget comes up because the profits gained and the effort necessary are so out of whack. It doesn’t take much to get entrenched congress people to do whatever you want, so for as long as they exist we’ll be seeing this sort of thing often.
Very clever and very simple. The most effective methods of profit in business usually are.
Note: When I say genuinely wealthy I’m also implying greedy. There are rich people out there that are perfectly happy just being as rich as they are. No harm there. But some people, some people have serious money addiction problems.