Using the vernacular meaning of the word "ratchet"(i.e. a synonym for trashy, slutty, drunk possibly all at the same time) Ratchet Cap applies to a place that is so "ratchet" that it might be considered by passers by to be the most ratchet place currently in existence, or the Ratchet Capitol, which is too many sylables for someone who is actually in the ratchet state of mind. Therefore the term is abbreviated as Ratchet Cap.
Dude1: Dude Why are we throwing beads at these drunk Ho's? It aint even Mardi gras?
Dude2: nah man Panama is the Ratchet cap, don't matter when it is throw beads see boobs.
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