Sotto Voce Declarations

Senate Majority Leader Mitch McConnell woke up on the wrong side of the bed on Monday.  Who could blame him?  His summer vacation’s been ruined.  President Trump’s been riding him all month like a pack mule.

 

 

The spoiler of Mitch’s summer vacation. People should generally avoid finding themselves on the receiving end of the master Tweeter’s fire and fury mode if they suffer from conditions such as geographic distance insufficiency or complete lack of nuclear deterrent syndrome. [PT]

 

What’s more, on Monday McConnell had to rise early and put on his suit and tie like an ordinary working stiff.  While his Congressional cohorts were busy vacationing in their summer recess, McConnell had important business to tend to that couldn’t wait until the return of Congress on September 5.  Namely, he had to make a public display of unity in his home state of Kentucky with Treasury Secretary Steven Mnuchin.

Following a social media lambasting of a deplorable taxpayer by Mnuchin’s new bride, and Mnuchin’s visit to Fort Knox to confirm the “gold is safe,” it was finally time to get down to business.

 

Treasury secretary Mnuchin goes on a gold inspection tour to Fort Knox and finds out that the assumed-to-be-there gold is actually safe!

 

Together, McConnell and Mnuchin held hands and insisted the U.S. government will raise the debt ceiling and avoid defaulting on its debt.  McConnell even made the following declaration:

 

“There is zero chance — no chance — we won’t raise the debt ceiling.  No chance,” McConnell said.  “America’s not going to default.  And we’ll get the job done in conjunction with the Secretary of the Treasury.”

 

Indeed, McConnell’s declaration was unequivocal.  But is it believable?  And who was he trying to convince?  Himself?  Wall Street?  President Trump?  Let’s explore…

 

Clearly, something needs to be done…

 

Thumbs Down

As far as we can tell, McConnell’s an amiable enough fellow.  He likely tips his barkeeps well.  He most definitely holds doors open for old ladies.  He may even strike a match after passing gas to mask the foul stench.  We don’t know.

But what we do know is that as Senate Majority Leader, his recent track record unequivocally stinks.  In fact, just last month McConnell was unable to get a promised job done.  Here’s how CNN documented the failings at the time:

 

“If anyone could have resuscitated the troubled Obamacare repeal and replace bill, it was Mitch McConnell, the steady and disciplined Senate Majority Leader with a track record of getting really tough things done. But after years of pleading, months of negotiating, and weeks of just barely edging the contentious bill forward, it suddenly died.  The end was unexpected and dramatic, as McConnell watched Sen. John McCain — his longtime friend and occasional political rival — walk to the center of the Senate floor and turn his thumb down to vote ‘no.’”

 

We happen to think McConnell will have similarly disappointing results getting the debt ceiling raised.  So far, things aren’t looking good.  Treasury Secretary Mnuchin keeps saying he wants a clean debt ceiling bill, with no policy conditions attached.  But it doesn’t appear there is a snowball’s chance in hell that he will get what he wants.

 

One of these days a debt ceiling increase will run into heavy weather…

 

Before the debt ceiling can be raised, big time horse trading will most definitely take place.  Agreements and side deals on Trump’s border wall, spending cuts, tax reform, military spending, and healthcare legislation will need to be established.  By then, Mnuchin will have run out of the new debt he needs to pay the nation’s bills.

In addition, President Trump’s not ready to budge on his border wall.  At a rally in Phoenix on Tuesday, Trump threatened to shut down the government in October if border wall funding is not included in his new budget, which coincides with when the debt ceiling needs to be raised.

And yesterday, via tweet, Trump assigned advance blame to McConnell and Paul Ryan for the pending debt ceiling “mess.”  Obviously, a gigantic fight will go down in Washington next month.

´

Donald Trump and Mitch McConnell.

Photo credit: Nicholas Kamm / AFP / Getty

 

Calling Mitch McConnell’s Debt Ceiling Bluff

Last week we offered some thoughts on Why There Will Be No 11th Hour Debt Ceiling Deal.  Here we must clarify that we aren’t saying there will be no debt ceiling deal at all.  But rather, that it will come after Mnuchin has picked through all the seat cushions for pocket change, and stock markets have sufficiently panicked.

The fact is, McConnell has been dealt a bad hand.  After playing nice and biding his time in the Senate all these years, his time to be Majority Leader had finally come – he’d finally risen to the top of the trash heap.  What a disappointment it must have been to first look out at the 115th United States Congress and see the most dysfunctional collection of political miscreants and lowlifes in living memory staring back at him.

In a game of poker, the wise thing for McConnell to do would be to fold his hand, pick up his chips, and walk away from the table.  But his job is not a game.  And the stakes are far too high to just get up and walk away.

 

Federal debt to GDP ratio. Note that these data do not include any provision for the government’s unfunded liabilities. The ratio has been in an uptrend since the early 1980s, which was briefly interrupted during the Clinton presidency as the stock market bubble flooded the government’s coffers with capital gains taxes and social security surpluses created the false impression that there was an actual surplus. Since the 2008 GFC, the ratio has soared – it has now reached levels that are widely considered to retard economic growth substantially. [PT] – click to enlarge.

 

Thus, he’s left with one option.  He must bluff.  He must pretend the debt ceiling vote will be a piece of cake.  That it is business as usual and that there’s “no chance” the debt ceiling will not be raised.  That after much foaming and frothing a deal will be struck like it always has been in the past.

More importantly, he must convince stock market investors this is the case.  So far, his task of convincing stock market investors has been easy.  Most investors are complacently soaking up their remaining rays of summer sunshine.

 

Mitch in the doghouse. Maybe someone will throw him a bone?

 

However, by the week of September 18 – if not before – all of this will change.  All lingering glows of Labor Day BBQs will be completely snuffed out by then.  Investors will sit down at their desks, look around, and quickly discern what credit markets are already telegraphing. That Senate Majority Leader McConnell is holding a hand of nothing. In other words, stock markets will call his bluff and sell in unison.

 

A collection of poker bluffs gone wrong…

 

Chart by: St. Louis Fed

 

Chart and image captions by PT

 

MN Gordon is President and Founder of Direct Expressions LLC, an independent publishing company. He is the Editorial Director and Publisher of the Economic Prism – an E-Newsletter that tries to bring clarity to the muddy waters of economic policy and discusses interesting investment opportunities.

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • How to Buy Low When Everyone Else is Buying High
      When to Sell? The common thread running through the collective minds of present U.S. stock market investors goes something like this: A great crash is coming.  But first there will be an epic run-up climaxing with a massive parabolic blow off top.  Hence, to capitalize on the final blow off, investors must let their stock market holdings ride until the precise moment the market peaks – and not a moment more.  That’s when investors should sell their stocks and go to...
  • What Kind of Stock Market Purge Is This?
      Actions and Reactions Down markets, like up markets, are both dazzling and delightful. The shock and awe of near back-to-back 1,000 point Dow Jones Industrial Average (DJIA) free-falls is indeed spectacular. There are many reasons to revel in it.  Today we shall share a few. To begin, losing money in a multi-day stock market dump is no fun at all.  We'd rather get our teeth drilled by a dentist.  Still, a rapid selloff has many positive qualities.   Memorable moments from...
  • US Stocks - Minor Dip With Potential, Much Consternation
      It's Just a Flesh Wound – But a Sad Day for Vol Sellers On January 31 we wrote about the unprecedented levels - for a stock market index that is - the weekly and monthly RSI of the DJIA had reached (see: “Too Much Bubble Love, Likely to Bring Regret” for the astonishing details – provided you still have some capacity for stock market-related astonishment). We will take the opportunity to toot our horn by reminding readers that we highlighted VIX calls of all things as a worthwhile...
  • When Budget Deficits Will Really Go Vertical
      Mnuchin Gets It United States Secretary of Treasury Steven Mnuchin has a sweet gig.  He writes rubber checks to pay the nation’s bills.  Yet, somehow, the rubber checks don’t bounce.  Instead, like magic, they clear. How this all works, considering the nation’s technically insolvent, we don’t quite understand.  But Mnuchin gets it.  He knows exactly how full faith and credit works – and he knows plenty more.   Master of the Mint and economy wizard Steven Mnuchin and...
  • Why I Own Gold and Gold Mining Companies – An Interview With Jayant Bandari
      Opportunities in the Junior Mining Sector Maurice Jackson of Proven and Probable has recently interviewed Jayant Bandari, the publisher of Capitalism and Morality and a frequent contributor to this site. The topics discussed include currencies, bitcoin, gold and above all junior gold stocks (i.e., small producers and explorers). Jayant shares some of his best ideas in the segment, including arbitrage opportunities currently offered by pending takeovers – which is an area that generally...
  • “Strong Dollar”, “Weak Dollar” - What About a Gold-Backed Dollar?
      Contradictory Palaver The recent hullabaloo among President Trump’s top monetary officials about the Administration’s “dollar policy” is just the start of what will likely be the first of many contradictory pronouncements and reversals which will take place in the coming months and years as the world’s reserve currency continues to be compromised.  So far, the Greenback has had its worst start since 1987, the year of a major stock market reset.   A modern-day...
  • The Future of Copper – Incrementum Advisory Board Meeting Q1 2018
      Copper vs. Oil The Q1 2018 meeting of the Incrementum Fund's Advisory Board took place on January 24, about one week before the recent market turmoil began. In a way it is funny that this group of contrarians who are well known for their skeptical stance on the risk asset bubble, didn't really discuss the stock market much on this occasion. Of course there was little to add to what was already talked about extensively at previous meetings. Moreover, the main focus was on the topic...
  • Seasonality of Individual Stocks – an Update
      Well Known Seasonal Trends Readers are very likely aware of the “Halloween effect” or the Santa Claus rally. The former term refers to the fact that stocks on average tend to perform significantly worse in the summer months than in the winter months, the latter term describes the typically very strong advance in stocks just before the turn of the year. Both phenomena apply to the broad stock market, this is to say, to benchmark indexes such as the S&P 500 or the...
  • Strange Economic Data
      Economic Activity Seems Brisk, But... Contrary to the situation in 2014-2015, economic indicators are currently far from signaling an imminent recession. We frequently discussed growing weakness in the manufacturing sector in 2015 (which is the largest sector of the economy in terms of gross output) - but even then, we always stressed that no clear recession signal was in sight yet.   US gross output (GO) growth year-on-year, and industrial production (IP) – note that GO...
  • US Equities – Retracement Levels and Market Psychology
      Fibonacci Retracements   Following the recent market swoon, we were interested to see how far the rebound would go. Fibonacci retracement levels are a tried and true technical tool for estimating likely targets – and they can actually provide information beyond that as well. Here is the S&P 500 Index with the most important Fibonacci retracement levels of the recent decline shown:   So far, the SPX has made it back to the 61.8% retracement level intraday, and has weakened...
  • Update on the Modified Davis Method
      Whipsawed Frank Roellinger has updated us with respect to the signals given by his Modified Ned Davis Method (MDM) in the course of the recent market correction. The MDM is a purely technical trading system designed for position-trading the Russell 2000 index, both long and short (for details and additional color see The Modified Davis Method and Reader Question on the Modified Ned Davis Method).   The Nasdaq pillar...   As it turns out, the system was whipsawed,...
  • Market Efficiency? The Euro is Looking Forward to the Weekend!
      Peculiar Behavior As I have shown in previous issues of Seasonal Insights, various financial instruments are demonstrating peculiar behavior in the course of the week: the S&P 500 Index is typically strong on Tuesdays, Gold on Fridays and Bitcoin on Tuesdays (similar to the S&P 500 Index).   The quest for profitable foresight...[PT]   Several readers have inquired whether currencies exhibit such patterns as well. Are these extremely large markets also home to...

Support Acting Man

Item Guides

Top10BestPro
j9TJzzN

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com

Diary of a Rogue Economist