You need a PLUS account to view this content. Try one month of PLUS for FREE.
Already have an account? log in
‘Catastrophe’ Talk Heats Up As US Nears Intentional Default
"This would be a constitutional crisis," Janet Yellen told George Stephanopoulos on Sunday.
She was referring, of course, to the prospect of Joe Biden invoking the 14th Amendment to allow the US to keep meeting its financial obligations in the event Congress doesn't raise the debt ceiling in time for what could be a default as early as next month.
"It didn't seem like he took it off the table," Stephanopoulos said. Last week, Biden didn't rule out the end-around, which would entail citing the
The problem with Stephanopoulos’ question (and much of the commentary around our “possible options”, whether the 14th or a big friggin coin) is that default isn’t what’s crucial to avoid, rather it’s a loss of confidence in the current dollar-based system. And nearly all of the options, even if they avoid or delay default, still invite a loss of confidence. While the courts are figuring out whether option B, C, and D were legal or not, nothing good will be happening (except maybe for Bitcoin/still time to buy?).
My recollection, fuzzy as it is, of previous debt ceiling standoffs (2011, 2013) is that the Federal givernment can partially shut down so that Treasury can keep paying UST coupons.
Is that not a possible scenario here? Federal govt shuts down, a million Federal employees furloughed, Federal facilities and functions from National Park Service to Federal Aviation Administration, Federal Courts to Veterans Administration, shut down. Congressional paychecks, Medicare and Medicaid payments, tax refunds, shipping and air travel, stop. Department of Defense, FBI, CIA, NSA and Homeland Security keep going.
Congressional Republicans will be able to endure about 3 days of that, I’d speculate, before enough vote with Democrats on a clean debt ceiling raise.
Budget impasse shutdowns in Clinton and Trump administrations didn’t go well for Republicans either.
By the way, maybe someone should tell the stock market about all this. Mr. Market appears to be blissfully unawares.
Mr. Market is a student of history, and he expects that enough Republicans will recognize this as the losing battle that it is and cave quickly enough to avoid any major damage. However, I’m not smart enough to see what it costs to hedge the left-tail risk in the case that the Republicans are firm in their suicide pact, but seems like a good time to hedge a bit just in case.
I am so tired of being represented by stupid, essentially dishonest people. One thing our Congressional representatives, in both houses, have in common is that at the start of each Congress, in January, they all take an oath. This oath is not taken on a Bible to swear to represent only members of their respective parties in their state only. Rather, they each swear to participate in the collective governance of the whole country and all its citizens equally, regardless of their state or political stripe with adherence to the US Constitution. Period. Unfortunately, the fact is that essentially all the 535 people we have collectively elected to our two houses of Congress are liars who have committed a felony by ignoring that oath they all took. They know that, but there they sit, making millions on insider trading, fees for public appearances (which they should offer for free) and other emoluments and benefits none of the rest of us can receive. If one is a member of a state legislative body, one takes a similar oath to help govern their state, all of it, not just republicans or democrats, but everyone the same. More liars.
When I was a youth (1940s, 50s, and 60s, regular polls were taken periodically asking people to indicate the level of respect they had for people of various groups such as, judges, doctors, lawyers, union leaders, legislators, whomever, even used car salespersons. When I was a kid these polls produced rather consistent results. Doctors and members of SCOTUS were the most highly respected groups, generally supported by 75-80% of those polled. At the bottom of the list we typically saw lawyers, used car salesmen, and legislators in Congress with only 20-25% of those polled declaring respect for members of these groups. I don’t see much change at the bottom but there does seem to be something of a rush from new groups trying to get there. I’m especially concerned about greedy SC Justices who think they are the law so they don’t have to obey it. We have known about the dishonesty in Congress for decades, but SCOTUS used to be above all that. A general erosion of ethics there, coupled with any commitment to ignore that little ethical barrier, doesn’t leave me with much optimism. Our rules make us civilized, with all of us willing to make universal sacrifices. To ignore our age-old rules so openly these days makes us …. something else. To not pay our debts will put us smack in the third world.