Why is No One Talking About The Debt Ceiling?
This article might be outdated by next month, as what I’d call the debt ceiling crisis is being purposefully downplayed by Congress and the media. We got word from Pelosi that there would be no raising the debt ceiling (the limit of debt our country can have) with little reaction from the media. While the media is busy gaslighting everyone about how the unvaccinated (whom we will affectionately refer to as Purebloods) are enemies of the State, and are degenerate scum who do not recognize the glory that Ingsoc has brought our nation. It really says a lot that that is all they even speak about these days. Even as I sit here in a hotel lobby eating breakfast, the TV is blaring news about “the explosion in Covid cases” and “how parents are angry that they aren’t enforcing vaccine mandates on kids!”
Unfortunately, when you live in a below average intelligence country, where the elitist powers-that-be are no smarter than you’re average Redditor midwit, many pressing matters are left to die another day. Except there aren’t just other matters to be speaking on. The effectiveness of news media’s strategy to keep the average American in a spell of unimportant issues is pretty mindblowing, if you think about it. They have managed to distract Americans so much that we don’t even know what an economic boom or bust looks like, what it looks like when your nation is on the verge of collapse, what a third-world city, state, or country looks like. The average American is so detached from reality, that when the possibility of the US defaulting on its debt could come to fruition next month, there’s nothing but crickets.
Regardless of the rabblerousing from our government and the media, there’s still plenty of info out there to educate yourself on. Well, kinda. It seems the biggest voice of reason and also coercion is Secretary of the Treasury (former Fed Chair) Janet Yellen. She has spoken impassioned and invigorated, bringing up how pertinent it is the Congress raise the debt ceiling or the sky will fall! But why? The important thing to always remember is that bureaucrats only get impassioned when it concerns their own reputation or wallet. I repeat, bureaucrats only get impassioned when it concerns their own reputation or wallet.
Yellen is freaked out because if we cannot artificially induce inflation via giant spending bill, then her usefulness, her special PhD, along with especially Powell’s ass, are in deep trouble. They will be the two fall guys for the failures to “keep people employed” or “get people spending again” or “getting banks to lend again.” I can’t wait for Powell or Yellen to pull a Bernanke and go out and just boldly insult the American people, calling them lazy for not wanting to get a job when the market-clearing wage is not being offered, and to go and spend their money and stop being greedy. Basically, “Hey do job for me! If you don’t spend and get a damn job, my boss is gonna kill me!”
The funny thing is just how true this is. Everything to do with monetary tools from the Fed are either going to be extremely ineffective or, in the case of going full communist, extremely inflationary. So, when the prospect of the US government being at an ideological and fiscal stalemate, where the Democrats can’t go any further without just being flat out hated by everybody, and the Republicans can’t get anywhere because they’ve nailed themselves as the “party of low taxes and that’s about it”-ism, it becomes a glaring issue for Yellen. If the deficits aren’t run up, with maybe a few stimmie checks, a dabble of unemployment, a pinch of infrastructure spending in every single bill, then maybe people will start getting to wise how she and Powell are basically just figureheads playing a psychological game on the American public. They’re showrunners, and if an actor calls in sick, they have to freak out. Not just for their reputation, but to keep the entire show going.
But say this isn’t actually as simple as I’m saying it is. What is Yellen is right? Well, she damn well could be. What happens when the government is spending way too much, and doesn’t have the ability to issue treasuries to pay for that spending? Well, there are “emergency measures” that could be put in place. They could go into some temporary austerity mode and strip funding to anything except essentials. This would restore some level of trust in the dollar, as the government that prints it is happy to go back on its decades’ of financial promises to help maintain the system (good thing). Ultimately, though, this is too fantastical of a situation. Personally, I just predict a gov’t shutdown, maybe some bitching and moaning, a protest or two, some level of “bipartisan compromise” and voila, crisis avoided.
But we have to talk about something else, which might end up being a derivative crisis, that the Fed and the US Gov’t are not prepared for:
The mighty Eurodollar.
What if, in anticipation of there being some kind of US gov’t default, domestic commercial banks, foreign central banks, foreign commercial banks, the entire banking sector and dollar market starts thinking to themselves, “Wait, the entire planet is going through several major cultural, social, and economical crisises all at once? Every single one feeds into the other. Now, the two parties in the US Congress are fighting with one another over where to put every last dollar? Are they having a dollar shortage? Are they disinterested in printing money? Do they not want to print treasuries like crazy for us to use as collateral? Wait a minute: do they actually want to destroy the entire system just to win a culture war? Oh. My. God. They might actually do it!”
Now this is unlikely in normal, non-crisis, non-batshit times. However, quick reminder: we live in the opposite of that. If there is some anticipation of this, and it spreads, and whether or not it turns out to be true, there could be a giant crisis of dollar-demand that leads to everyone squirming for dollars and collateral as Congress fails to churn out the once-imagined monthly bills that would run up the public debt, cause inflation, and allow all USD debtors to wipe the sweat from their brow and relax. Unfortunately, the reality of that shortage draws near as the move towards not even just austerity, but basically the reluctance for even Democrats to pass loose financial spending. AOC might be the talk of the town, but she is most definitely not in charge.
This is the big realization everyone is going to have: there will be no UBI, there won’t be a spooky CBDC, there won’t be universal healthcare, or free college, no. Hate to redpill you without your consent, but the Democrats are using this as bait for conservatives, and to pander to their base. If they stop making promises, they stop getting votes. Even in the event of a debt default, they will still be using the social democrat rhetoric of, “No, we definitely want free X, it’s just the damn Republicans won’t allow that to happen! Curse them!”
For conservatives, I think there will be some shift, where Democrats have to accept defeat and say, “We are so sorry, and actually, we were so totally wrong, and all the things we wanted were just so that we can could get power.” I’m sorry, but even Pol Pot was denying his own evils all the way up to his death. There won’t be a change of heart and an apology. That’s why you have to be ready for things to change quick, and to not pretend like you’ll get all the closure that you want. Hell, even if the aftermath is led by your own preferred group, it won’t all be to your every specific liking. To think like that is pathological in and of itself, which is what brings us full-circle: the average American is mentally ill. They are generally disconnected from the world around them, heavily addicted to their dopamine, and extremely attached to their habits and their things. They like movies, and when bad or sad things happen, and there isn’t some great ending like in Indiana Jones or Star Wars, they cry and freak out. Normally long-standing conflicts end in a whimper, not a bang, and obviously, I likewise think that about America, about the monetary system, and most definitely, this bizarre debt ceiling debacle.
If there is an off-chance that this is Congress pushing this along to grandstand later, or they know something that you or I don’t, then hell, I look forward to the freakshow. Unfortunately, at best, it will be a wet fart. At worst, it will be the trigger for the end of the monetary system. What is important to remember, though, is that this will all end in austerity, because it ultimately has to. The inflation fears will die down, at best, we will return to the low, sad growth and economic blunder of post-GFC, but most likely, the knife will continue to be twisted in the average hardworking American’s soul.
What will be interesting is seeing if this really is when Democrats back down on the giant budgetary proposals, if Manchin will continue to hold the line of fiscal conservatism, but most of all, if this will even cause a bit of a reaction in the markets, which I would say it's pretty certain it will. Why wouldn't it? Hell, it could send indices to more record highs. The emotional reactionism is all-too prevalent in all markets, right now, and like we all understand: SOMETHING HAS TO BREAK.
The flipside is if they really do try to keep passing giant three-trillion-dollar bills left and right, then we lose. They know this. Everyone knows this. It's so common to the point that inflation has become the talk of the town, and inflation expectations continue to outperform that of inflation itself. Inflation has already topped, and the inflation rate has fallen for the first time in months, but you won't hear that from fund managers and stock bulls; they need a good story, and if they don't have that, if the economy really is back to moving at the speed of marmalade, then there is no artificial bull moves left, and people will go back to dollars.
That's ultimately the real underpinning of the Fed's narrative: they need us to keep pretending the economy is heating up, that inflation is exploding, and that we all need to put our money in stocks and investment funds because inflation is just so damn hot! We need to keep passing these spending bills, because according to Keynesians, public spending leads to economic growth (mostly false), but that doesn't matter: THE NARRATIVE MUST BE PUSHED!
I have gone on for too long, but keep all of this in mind as the mid-October "deadline" nears, and there is some confusion and anxiety. Keep in mind it is all about trying to keep the narrative of "inflation and the economy are running hot!" so that the market doesn't go back to crashing like it should, so that defaults that need to happen happen, so that countries with dollar shortages go bust; the fiddler must be paid, and the Fed doesn't want that to happen. There are so many economies, jobs, livelihoods tied to a fleeting, at best short-term, narrative, that only works on continuous government overreach and spending. Let it die, Yellen. Let it die, Powell.
“I cannot trust a man to control others who cannot control himself.”
Robert E. Lee