RE:RE:US Debt Ceiling - Should We Worry?Raising the debt ceiling in the US doesn't drain liquidity from the system. A fundamental issue with the debt ceiling law in the US is that Congress has already approved the expenditures and they are the law of the country. The problem is that these expenditure programs are approved even though all the legislators know that the funding of these programs will exceed the debt limit. Which, IMHO, is sheer stupdity.
Government expenditures are by their very nature stimulative and don't drain money from the system. Interest payments on the debt do take money out of the system and in extreme cases like the early 1980s result in the Government competing with the private sector for money and the end result is higher interest rates which is not a good thing and usually leads to a recession.
In the US, under The Federal Reserve Act, The Fed can print money out of thin air and lend this money to the Federal Government. The curious thing is that after The Fed pays its bills to operate and pays out a 6% dividend to its shareholders (its member banks - yes that means that despite its name, The Fed is not owned by the people of the US), the rest of the income goes back to the US Treasury Department. This means that after a certain point, any Government borrowings from The Fed are essentially interest free and don't affect the annual budgetary deficit. This is what was happening for the last number of years. From this perspective, the massive increase in spending in the US that we have seen and still feeling the effects of are purely stimulative and hence the inflation we are seeing.
The fly in this ointment is that the printing of all this money leads to inflation which leads to quantitative tightening (higher interest rates and the reduction in the Feds balance sheet) and ultimately to your point - a recession.
The Nexus we are seeing now is that The Fed has stopped printing money to fuel Biden's trillion dollar programs and going forward, The US Federal Government will be faced with higher interest payments and spiralling deficits and this will get worse unless the debt ceiling "debate" results in a slower growth in Government expenditures. This is esentially what McCarthy was talking about yesterday on Wall Street.
Your last point in your post is important. If anyone thinks that the dance this time around will lead to anything different then, IMHO, they must also believe in the Tooth Fairy AND the Easter Bunny!!