May 2023, Amplified – David Gritz and Michael Waitze – US Debt Crisis – Solvency or Liquidity


Michael Waitze worked in Global Finance for more than 20 years, employed by firms like Citigroup, Morgan Stanley and Goldman Sachs, primarily in Tokyo.  Michael lived and worked in Tokyo from February 1990 until December 2011.  Michael always maintained a particular focus on how technology could be used to make businesses more efficient and to drive P/L growth. Michael is a leader in the digital media space, building one of the biggest and fastest-growing podcast listener bases in the region.  His show has listeners in more than 130 countries and his company, Michael Waitze Media produces some of Asia’s most popular podcasts.

David Gritz

David Gritz is an InsurTech community leader, public speaker, and InsurTech advisor. He has been featured in recognized Insurance media including Carrier Management, Digital Insurance, IIR, AM Best TV, and the Re/Image Podcast. David is the co-founder of InsurTech NY, the largest InsurTech community in the NY metro area. David also serves as a strategic advisor to high-growth InsurTechs to help them go from concept to scale. Previously David has served as the Director of Innovation for the Silicon Valley Insurance Accelerator (SVIA) and has led product at Zero, a behavioral safety focused InsurTech acquired by EverestRe. He holds a J.D. from the Mitchell Hamline School of Law and business and industrial engineering degrees from Lehigh University.

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This month, ⁠David Gritz⁠ and ⁠Michael Waitze⁠ spoke about the current controversy surrounding the US debt ceiling. We delved into the question of whether the debt ceiling truly matters and examined the potential ramifications if a deal is not reached.

David brought up some interesting points about the shortfall in tax revenue compared to expenses. While there is a gap, he emphasized that the government would still be able to cover its interest payments, thus avoiding a complete default. He cautioned against sensationalized doomsday scenarios, highlighting that the media tends to exaggerate the potential consequences.

We also discussed historical examples of debt default in other countries and its impact on interest rates and economies. David pointed out that the US is in a different position, as it has the ability to print money and is considered a safe haven for investors. He mentioned that countries like Japan and China, which hold a significant amount of US debt, have their own demographic challenges and rely on the stability of the US dollar.

We explored various strategies that could be employed to address the debt ceiling, such as invoking the 14th Amendment or utilizing a discharge petition to bypass committee approval. These methods come with their own complexities and uncertainties, but they provide potential avenues for resolution.

During our conversation, I mentioned the role of the news cycle in amplifying the controversy. It seems that whenever there is an opportunity to create sensational headlines, the media seizes it. We also touched upon the challenges faced by political leaders, including House Speaker Kevin McCarthy, who must navigate the intricacies of their caucus while trying to reach a deal.

David and I shared different projections for the outcome. He leaned more towards an optimistic scenario, anticipating that the 10-day recess might be removed to provide additional time for a resolution. In contrast, I expressed a slightly more skeptical view, suggesting the possibility of a market dislocation that could be exploited by opportunistic hedge funds.

Overall, our conversation shed light on the complexities surrounding the US debt ceiling controversy. While there are varying opinions and predictions, it remains to be seen how the situation will unfold and how policymakers will navigate these challenging waters.

Some of the details we considered important:

  • While some doomsday scenarios suggest dire consequences if a deal is not reached, we analyzed the actual statistics and related government obligations
  • Even if the government has a shortfall in tax receipts, it can easily cover interest payments on existing debt, even if the ceiling is not raised
  • Historical precedent has shown that even if governments do default, the consequences are short term
  • Markets and credit rating agencies are forward-looking and are not currently predicting downgrades or default
  • We predict some potential outcomes!

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