Does something wicked this way come in the next six weeks or so?
The news yesterday was that the congressional talks that were supposed to lead to a political deal that would permit a vote on increasing the nation’s debt limit had “broken down”, with key figures announcing their upcoming absence from the next session. This has Wall Street buzzing with doom talk. Here’s an example, from Politicos Morning Money:
One frustrated institutional investor told M.M. yesterday as the Biden talks dissolved: “Those of us in the market are just agog at the sheer, short-sighted idiocy of policymakers who have virtually no clue about how the world actually works. It’s like watching a caveman trying to disarm a nuclear bomb with a club. The armed state of the bomb can be changed in one of two ways-it gets defused or it blows up. The price of gold shows you which way most people believe this bomb will be disarmed. …”
MISSED OPPORTUNITY – The investor continued: “With the eurozone under systemic stress and China facing significant internal challenges and Japan a virtually closed economic system, the U.S. has a chance to reclaim some of its lost ground in world economic standing by behaving like grownups, and instead we have petty squabbling among debt deniers. In the meantime, the dollar’s share of the world’s reserve currency is falling … Talk about a seismic shift in the American quality of life, this will make the effects of an austerity program LOOK LIKE PEANUTS.”
There can be little doubt that a default on the US debt obligations would be a game-changing event.
Would Middle Eastern nations continue to sell us oil if we were in default on our fiscal obligations?
What happens to our troops in the field? Do we abandon them in place? Or fly them home and leave their equipment behind?
“Oh Bob, you are so alarmist.” Well, yes, but if the government doesn’t have the money, then it can’t supply the troops, nor can it move the troops. We would not be the first international empire to abandon troops in the field. When the Romans withdrew from Brittain, they left soldiers behind.
Now might be a good time to check your food storage and top off your household storage plan. Or start one, if you don’t have one.