Isn't the 'income' part only a minor detail. Even if there was a shortfall from tax revenue, the US has a huge amount of property it could sell off to pay it's debts. Just the National Parks alone would generate enough revenue for many years of interest payments.
"The solution came during the budget crisis of 2330, when the Brawndo corporation simply bought the Food and Drug Administration and the Federal Communications Commission, enabling them to say, do, and sell anything they wanted"
Rather than selling off real assets, the answer is for the executive to create new money themselves ("mint the coin") rather than continuing to be beholden to the Federal Reserve. As we saw with this last spate of pandemic price inflation, the Federal Reserve's technocratic mandate means they will have to adjust and take money out of circulation to compensate.
3. Functionally this raises the debt ceiling, albeit in a roundabout manner
4. Fed. Reserve tightens monetary policy to compensate for increased circulation of USD
5. Banks are less able to lend cash on a credit basis to private enterprise, since all banks are dependent on Fed. Reserve for cash to back such lending
If it continues long enough wouldn't this eventually mean that the only entity with any credit would be the Federal Government? I'd suspect a weird commercial futures swap market would pop up in lieu of traditional credit lines.
First, you're missing the step between (3) and (4) where the money actually enters the economy, through government spending. And since the government has already publicly committed to that spending, it's basically already priced in. Furthermore it's the exact same effect as if the debt ceiling were just raised as usual, rather than being held up for political chicken kayfabe.
For (5), the ability to issue credit doesn't change. Rather the interest rates do. The current rates are still quite low. They only seem like such a shock because we've had two solid decades of artificially low rates, meaning profligate monetary creation by the Federal Reserve. But rather than being spent purposefully on societal investments, it was just handed to banks to use as they saw fit - causing the "everything bubble" we are suffering today.
My understanding is that money in the economy does not imply the existence of credit, only that money may be exchanged for goods and services.
I'm assuming this is a continuous loop. So over time wouldn't interest rates tend to infinity? Or maybe not, because raising interest rates at some point would be of no utility. If no one is using credit, raising rates doesn't actually change anything.
Securitization and surveillance compel repayment and thus allow for the existence of credit.
Interest rates and the ability to issue credit are mostly orthogonal concepts (interest rates do affect the real and perceived abilities of a debtor to pay back a loan, which does affect creditworthiness).
The sheer majority of "money" in our economy is actually credit/debt. Your bank account balance doesn't indicate a physical pile of money somewhere, rather it's debt the bank owes you. They in turn do things like buy US treasuries which are debt the government owes them, or loan it out as credit card balances which are debt that other consumers owe them. A dollar in your bank account contributes to your own sense of purchasing power AND (for example) the credit card user's purchasing power. Increasing interest rates makes debt less desirable to have, thus decreasing the money supply.
I don't know what you're saying about rates tending towards infinity?
