Calm Before the Storm?
Republicans fiercely battle Republicans to kill the debt-ceiling deal. Markets tremble and fall. Credit downgrades await.
At least, there is one publication on earth that gets it right: What is at stake with today’s House vote on raising the debt ceiling is not default on the debt, but a government shutdown (unless, of course, Biden decides to create a constitutional crisis and operate outside of the constitution, should the debt ceiling not be lifted). The National Post presents a poll today that frames the vote this way:
A majority of Americans – 54 percent – would prefer a partial government shutdown until federal spending reduces than avoiding a shutdown by authorizing higher levels of government spending
That is the proper option. If the debt ceiling is not lifted, then spending must be massively cut to stay within the debt ceiling, and the US debt “must not be questioned;” therefore payment of all debt-based expenses must come first. Discretional spending can be cut, even though congress already mandated it by budget because the constitution outguns congressional budgets or statutes. If the two are forced into conflict, especially when it is congress that forces the conflict, the constitution is to win every time. Any act by congress or failure to act that calls the US debt into question would be unconstitutional because “the US debt shall not be questioned.”
The House Finance Committee did move the debt-ceiling agreement between Biden and McCarthy forward on a 7-6, as I said I was sure it would do, although not quite in the manner I anticipated, and the House is scheduled to vote on it today. After which, it must be approved, if it passes the House, by the Senate. The latter is probably a slam-dunk, but approval by the House is a bit tenuous as the House Freedom Caucus went to war against McCarthy yesterday and today to do their best to defeat the bill. Still, it’s hard to imagine Biden will not command a majority of Democrats to support his compromise agreement, since it didn’t conceded much to Republicans or that McCarthy can’t get, at least, half of his contingent to go along with the compromise. I doubt a majority of Democrats are ready to take the fall for a credit downgrade or a government shutdown.
If the bipartisan debt-ceiling agreement doesn’t make it through, US credit is likely to be downgraded this week or early next; so, stocks are right to be trembling today, even though they are hyperventilating about “debt default.” A credit downgrade will be bad enough. The funny thing about the funny people who are driving up stocks in a time of national calamities everywhere is that the whole stock average has been riding up on the back of a single stock — Nvidia — due to extreme AI frenzy. There is zero support for this market’s rise outside of the AI frenzy.
As the Maverick of Wall Street points out in his typically humorous style today, the so-called smart money is making the dumb push, BUT they are the smart money because they always know how to push the frenzy high enough to get retail investors all cashing in, and that is when these Wall-Street Big Bucks cash out, reaping the rewards by shifting suddenly from pump to dump, letting it all land in the quick-to-be emptied hands of dumb retail investors who were foolish enough to fall for the mania. The Maverick says he sees signs of that starting to happen yesterday.
It’s one big pump and dump!
If you are not out of stocks in a time like this with several MAJOR bank defaults, cascading economic data, sticky inflation with slouchy GDP, pushing us back into the second dip of a stagflationary recession, plus falling earnings, world war, and Republicans at war with themselves, holding the US government’s good credit as hostage (because credit WILL be downgraded, whether the US actually defaults or not, if the debt ceiling is not lifted), then there is no one who should feel sorry for you.
The Daily Doom is here to help save you by warning you for months about what is coming before it breaks out above you. As it offers you support, it needs your support.
(Headlines for the above editorial appear in boldface type below for paid subscribers.)
Keep reading with a 7-day free trial