But the debt-ceiling charade is back.

The debt ceiling charade being played out every few years in Congress makes the entire world shake its collective head and pray that Congress will for the umpteenth time raise the dang thing or at least “suspend” it. The other option is a US default, the global consequences of which are too ugly to imagine, even for Congress.

In its infinite wisdom, Congress didn’t raise the debt ceiling in September; it only suspended it through December 8, after which the horse-trading will start all over again. But Congress is busy listening to lobbyists about the tax cuts – who gets them and who pays for them – and the debt ceiling isn’t even on the back burner. So here we go again.

But this charade has some peculiar effects, beyond its entertainment value: For months on end, it covers up the true extent of US government debt, and its continued surge. Then suddenly, the floodgates open.

Over just these six years, the debt has ballooned by $5.7 trillion, or 39%, from $14.8 trillion to $20.5 trillion. In the chart below, note the last three debt-ceiling fights, the long flat lines in 2013, 2015, and 2017, followed each time by an enormous spike when the debt ceiling was lifted or suspended, and when the “extraordinary measures” with which the Treasury keeps the government afloat were reversed.

The current post-debt-ceiling spike has reached $640 billion and continues to surge:

The last three debt ceiling spikes:

On October 17, 2013, the day after the debt ceiling was raised, gross national debt jumped $328 billion and then continued to surge. By November 25, it had jumped by $464 billion to $17.2 billion

On November 2, 2015, the day after the debt ceiling was raised, gross national debt jumped $340 billion and then continued to surge. By the end of November, it had spiked by $650 billion to $18.8 billion.

On September 8, 2017, the day after the debt ceiling was “suspended,” gross national debt jumped by $329 billion, and by now has spiked by $640 billion to $20.5 trillion. This spike is somewhat lower than my estimate on August 21 of an $800-billion spike, but it’s not through spiking yet either.

Those flat lines in the chart normally appear only once every few years when the debt hits whatever amount Congress put in place as the debt ceiling at the end of the last debt-ceiling fight. But this time, it’s different. As it stands, a new flat line will commence on December 8.

The Treasury Department has to borrow to pay for expenditures that the US Congress mandates the government to spend. But with the debt ceiling, Congress says, yes you must spend this money, but if you don’t bring in enough tax revenues – “ha-ha,” they laugh during tax-cut time – you cannot borrow the difference. You just might have to default.

As absurd as the concept of a debt ceiling may seem, Congress is unlikely to do away with it. At the same time, it has always and will always compromise, if at the very last moment, to avoid a default. There will be no default. Lawmakers are political animals. But they’re not stupid.

On November 1, the Treasury warned:

If Congress fails to increase or further suspend the debt limit by December 8, Treasury, as it has in the past, can take certain extraordinary measures to continue to finance the government on a temporary basis. Extraordinary measures will allow the government to continue to meet its obligations through January 2018. It is currently too early to provide a more precise forecast as to how long the extraordinary measures will last.

So the preliminary out-of-money date is January 31. Congress knows that this out-of-money date can be pushed out, and with a good dose of well-honed Congressional brinkmanship, the flat line in the chart might extend into February or March. It will then be followed by another spike. The trend line of debt growth out the wazoo will remain intact. And if the tax cuts pass, the trend line will get even steeper – until it hits the next debt ceiling.

The Fed announced the QE unwind in September, and now it’s following through. But what’s happening with its mortgage-backed securities? Read… The Fed Actually Begins its QE Unwind

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