Loading ...LUONGO’S SCENARIO IS PLAYING OUT IN THE DEBT CEILING EVENT
Interesting take from Luongo
I am not anything close to an expert on debt and ceilings but I cannot see any holes in Toms Brilliant analysis
see the piece in the comment ( it’s for members only …but Here you Go Goltenters)
A little something to chew on this morning after I was contacted by Sputnik News for some comments. In bold are their questions and my responses to each. In Italics are my further comments to y’all. Enjoy!
Treasury Secretary Janet Yellen said Monday that the US would default in a month if there were no decision from the Congress. It’s worth noting that the US has never defaulted, and the consequences of this event seems to be difficult to predict. Could you help our readers understand: how serious is the problem and what could happen if the US fails to pay its debts?
This is a serious problem because of the degradation of our political sphere here in the US. Janet Yellen and the “Biden” Administration do not represent the American people at all, IMO. She has been playing up this debt ceiling fight going back to November, as a warning that she will get her way to continue unlimited spending or she will force a default.
This was a warning to the incoming GOP majority in the House (and de facto majority in the Senate) that she and President Biden will force a default by not paying on US Treasuries rather than the Executive Branch, i.e. the President, shut down portions of the government until a deal is reached.
The big picture here is creating chaos for the financial markets to consider – freezing foreign capital that may want to flee into the US. That’s the goal. Yellen doesn’t have a lot of cards but she and “Biden” will bluff until the very last minute.
As I wrote in the Munchings about Blackrock last week, so much rests on the debt ceiling resolution now. It is the fulcrum on which the entire next year of D.C. politics rests. Because McCarthy is in a tough spot and he knows it.
Will this cost him the Speakership if he caves? Likely. Are Uncle Jamie and Father Jay (and I use these terms very ‘tongue-in-cheek’) really in charge of things up there? Again, the way this plays out will tell us that.
The expected outcome is for the GOP to cave as they always do. But a divided House and Senate give the majority of the power to the ones who sit in the middle, not the leadership who we know to be fully compromised.
That’s why this time could be very different. I stress “COULD,” not will.
As a response to Yellen’s statement, Joe Biden called the top four congressional leaders, including House Speaker Kevin McCarthy, to discuss raising the debt ceiling. In the 2011 debt ceiling crisis both parties managed to find an agreement and avoid the default. How possible is the agreement this time?
Biden wants a clean raise without strings, exactly the opposite of the November 2021 fight where Pelosi demanded tying spending bills to the debt ceiling. The GOP won that fight. Or, in my view, the Fed and NY banks won that fight. It was the beginning of the current era of tight monetary policy in the US.
Biden lost that fight because he never had a majority in the Senate. This time he’s facing the same challenge but with a GOP majority in the House willing to burn the Speaker to the ground if he doesn’t cut spending.
In the Senate Chuck Schumer is Majority-Leader-In-Name-Only, able to only set the committee populations and leadership. Legislatively, he’s a lame duck. Joe Manchin is in charge of this negotiation. The closer we get to 2024 the more DNC solidarity on insane spending against the wishes of the American people will fail.
Manchin can force a “Biden” veto. Biden’s legal troubles are also mounting. If Schumer loses this fight Biden will lose his political cover over the Hunter Biden laptop and his corruption in Ukraine.
A settlement is inevitable. The question is who will win. IF the GOP holds their water and gets most of the spending cuts it wants, it will set off a chain of events that “Biden” cannot control politically. It will be a good thing for the US.
Manchin isn’t the only one with pull here. There will be squishy Democrats who can see the wind shifting and who even don’t want to be around after next year, so withholding vote fraud support or money for re-election may not be as powerful blackmail as it has been in the past.
At the same time do not count out the Romneys in the Senate. This is why they were put there, to ensure at certain moments Davos gets exactly what they want. What’s interesting is how quiet Romney has been so far on these things. He’s not either had to be activated (likely) or there is more division within the DNC than we suspect and he couldn’t make a difference crossing party lines (less likely).
We’ll see. Again, if Gaetz et.al. win this fight, even if only symbolically with a minimal spending cut, it will have enormous repercussions for the rest of “Biden’s” first term.
How sustainable is it for America to keep increasing its national debt?
It’s not. At all. We have no more room on the national balance sheet to absorb more deficits. And yet, that’s all Yellen and “Biden” want…. More deficits, because they are vandals put in charge to ensure the destruction of the US rather than make even the barest minimum attempt at changing course.
That’s why this fight is so important. It is the signal to the world that we’ve reached Peak US Empire politically and are ready to begin cleaning things up at home. If the GOP fails here, the results downstream of this will be catastrophic, not just for the US but for most of the world.
No one should welcome a disorderly collapse of the US and yet that is exactly what I see from so many commentators.
JP Morgan Chase CEO Jamie Dimon claimed yesterday that the US banking crisis was over after his bank bought out First Republic. Do you agree with this assessment? (If more banks fail, can JP Morgan bail them all out?)
I think Dimon is signaling to the world that the Fed and Wall St. are in control of this demolition of certain, toxic aspects of the US financial system. He made a good deal for First Republic for his company. But he also made a good deal for the banking system, by keeping the fallout from FRC to a minimum and the cost to the FDIC low. That cost will be borne, ultimately, by Wall St. through fees which they won’t be able to pass on to consumers. Those fees will help level the playing field for regional banks in the long run.
This wasn’t Lehman Bros. where JPM was forced to take on their toxic garbage. FRC was the victim of a whisper campaign and, in my opinion, a target. Look closely at the resolution, there is very little ‘bad stuff’ in it. Nothing like Silicon Valley Bank or, historically, Lehman.
I saw that Blackrock wanted FRC and was denied. That’s a tell to me as to who is and who isn’t in the Fed’s favor right now. Read my latest piece on this.
The Blackrock being denied FRC is the biggest part of this story, folks. No doubt in my mind, JPM and the Fed came in and saved FRC who Davos wanted as a scalp. And if Blackrock had bought FRC wouldn’t that make it easier for Yellen to execute the SIFI-Two-Step because now, BLK owns a major bank.
In fact, that may have been the gambit all along to tie up Powell’s hands. On the other hand, BLK owning FRC would also allow them more cover to plan balance sheet games and keep the con going for a little while longer. From the beginning, JPM and Dimon swooping in to help out FRC smelled like defense against Davos. I think this just ties a bow around that inference.