USA Today headline: “U.S. stock futures trade lower after budget deal.”
U.S. stock futures were trading with slight losses in the wake of a deal in Washington to end a budget dispute.
Dow Jones industrial average index futures shed 0.2%, Standard & Poor’s 500 index futures fell 0.2% and Nasdaq index futures were down 0.1%.
Why should this be a surprise to anyone? The only surprise is that the futures haven’t lost a lot more value.
This deal is only to put off the fight for a few months and then start it all again in January 2014.
And, again, how can the markets feel safe that the government of the largest economy in the world has to borrow money in order to pay the interest on borrowed money?
Today’s column by Judge Andrew Napolitano makes the same point:
So today, when the president wants to borrow more than the law allows, the Fed can provide the cash, but the president needs a change in the law so as to have the legal authority to commit as yet unborn taxpayers to repay the government’s additional debt. While in office, Obama has borrowed about $1.2 trillion a year with the approval of Republicans as well as Democrats in Congress. The lenders are quick to make their loans, because the feds have never failed to extract the cash from taxpayers or borrow more in their names to pay the debt service. Presidents and Congresses don’t worry about paying back the principal or paying the debt service, as long as they can continue to borrow more in order to do so.
As absurd as it sounds, the federal government borrows money in order to pay the debt service on money it has already borrowed and spent.
Is it any wonder that today the government’s debt has reached $17 trillion?
Eventually, the smart money is going to realize that, no matter how often the Federal Government has paid back on loans in the past, eventually it must fail to do so. We moved that day closer with last night’s more-spending, more-borrowing, no-cutting vote.