Top Reasons to Raise the Debt Ceiling, in Recession and Recovery

2). Everyone asks, "How can we pay back this debt? We'll have to tax more." Not necessarily. In fact, not at all. Here's what will happen: We'll borrow this money, and then over time (two to five years) the dollar will greatly weaken, perhaps even cut its value in half compared with a basket of other currencies. In other words, the real value of our debt would get cut in half.

This is exactly what the United States did in 2002 when we were going into debt to stimulate a weak economy and pay for the Iraq war. We borrowed money and the real value of what we borrowed has gone straight down since the dollar has grossly weakened. The foreign countries that lend us money end up losing out on the deal. There are long-term consequences for this (perhaps those same countries will stop lending to us), but that hasn't happened to us yet, despite our repeated use of this "technique."

3.) It's too late not to raise the debt ceiling. What do people want us to do, default on the interest payments? As soon as we passed an $800 billion stimulus bill, on top of TARP, TALF, PPIP, etc., we were destined to increase the debt.

Fed Chairman Ben Bernanke knows that the greatest problem we had in the beginning of the Great Depression was lack of government intervention to stop thousands of banks from going out of business, which in turn resulted in 25% unemployment, bread lines, etc. So the plan becomes, stimulate the economy at every end of the yield curve, borrow money if the world still is willing to lend to us while interest rates are cheap, devalue the dollar to lessen the value of the debt we took on, and live to fight another day.