US Debt Ceiling Impasse And What 14.3 Trillion Dollars Looks Like

Unless US politicians can settle on a plan of action, on August 2 the United States of America will run out of money to cover its loan repayments. Currently those loans stand at a lazy 14.3 trillion. 

To clarify just what 14.3 trillion dollars looks like, Animal New York has shared an image showing how the US debt compares, in hundred-dollar bills, when stacked next to various New York City landmarks. That's the debt on the right there, towering over the former World Trade Center towers.

The US has always been able to take massive loans from other countries, because to the lenders, they seemed like a great deal. The world's richest economy wants to borrow a ton of money from you, and then pay interest to boot? Great deal! ... As long as you're paid back, that is. It's no wonder the headlines are screaming: if the US defaults on paying back its lenders, it will affect major markets like Japan and China, and then just about every country in the world. (On a side note, there's a great conspiracy theory going around right now that the rape scandal surrounding French ex-minister Dominique Strauss-Kahn was only cooked up after he found out that all the gold in Fort Knox has gone to China. Google it! And if I'm not here to blog next week, you know why.)

Meanwhile, Republicans and Democrats are frantically duking out the best way to cut spending, but they can't seem to agree. Mainly, because of a law change that came about earlier this year. Via News.com.au:

The US constitution says only Congress can authorise the government to borrow money. Since 1962 Congress has raised the debt ceiling 72 times. The Government needs to borrow money to pay back those bills, bonds and notes and to pay the pension funds. In 1979, a rule was passed that allowed the House of Representatives to automatically raise the debt limit to whatever level the budget needed. But in January 2011, the House voted to repeal this rule. Now they need to hold a separate vote to increase the debt limit. And that's where it has all gone pear shaped. They can't agree on how that should be done.

Just today, the Republicans managed to narrowly pass some legislation which was then killed by the Democrat-coontrolled Senate. Here's a crazy timeline of all the back-and-forth that's been happening between the parties over the last few months. Stressful much?

Some financial experts, such as those cited by NY Mag, feel we could make everybody happier in the meantime by minting a couple of trillion dollar coins. 

Here's one way out of the debt-ceiling impasse, courtesy of well-known Yale constitutional-law professor Jack Balkin: Sovereign governments such as the United States can print new money. However, there's a statutory limit to the amount of paper currency that can be in circulation at any one time. Ironically, there's no similar limit on the amount of coinage. A little-known statute gives the secretary of the Treasury the authority to issue platinum coins in any denomination. So some commentators have suggested that the Treasury create two $1 trillion coins, deposit them in its account in the Federal Reserve and write checks on the proceeds. We don't know, this proposal seems kind of ... bizarre. Why mint two trillion-dollar coins when you can just mint a single two-trillion-dollar coin? Other than that, it's perfect.

I'm no economist so I've tried my best to shed some light on this huge situation. In the meantime see the insanely scary US debt clock calculator. It displays every sector of the US debt as it ticks steadily towards the magic 14.3 trillion mark. Let's hope it doesn't explode.