The coming week could create more economic chaos than Brexit
This coming week will see some of the most important economic and political decisions taking place in perhaps the last 9 years, coinciding also with the historic negative frequency that is often attributed to the ‘Ides of March’.
March 15 will see the Federal Reserve decide whether they will begin a trek towards aggressively raising interest rates at a time when every real economic indicator is screaming recession. Â For example, last week the Atlanta Fed lowered its GDP forecast for the first quarter down to 1.2% after beginning the term with an estimate of around 3%.
Next we will have the question of whether Congress will vote to raise the debt ceiling and allow the government to borrow more money beyond the $20 trillion it already has in outstanding debt. Â And since this same legislative body simply gave up on doing their duty a year and a half ago when they just let President Obama borrow as much as he saw fit without a ceiling at all, it will be interesting to see what the Republican majority will do as they vehemently opposed raising the ceiling for most of Obama’s term… and even to the point of threatening a government shutdown on two occasions.
Lastly we have the start of election season in Europe, and in particular, the European Union as the Netherlands will be first on the docket, and the anti-EU candidate Geert Wilders is currently expected to win the race for the Presidency.
All three of these events coinciding on the same day have the potential to create extreme chaos for markets all around the world, and in particular Europe which is already under pressure by more and more factions wanting to exit the Union. Â And in an interview on March 9 with Fox News, David Stockman, the former Budget Director under President Ronald Reagan, believes that the Democrats will fight raising the debt limit the same way the Republicans did under Obama, and it will create a scenario before its over where the government runs completely out of money.
âAt the rate they lost cash last year, between March and early June, they will be out of cash by Memorial Day. There is no reason to believe that will be any different this year.â
Stockman then exposed the severity of the crisis and the politics of Congress stating, âThere is no pathway to a majority in the Congress that soon [to raise the debt ceiling]. They have declared war on the Democrats. After all of the immigration ban, the walls at the border, the deportations, the attacks on ObamaâŠ there are zero Democrat votes for debt ceiling increase right now. In the bloodbath that is happening on Obamacare-LiteâŠ is that by May the Republican party is going to be in tethers. There will be no majority to raise the debt ceiling. By then the rubber will meet the road. Theyâll have to start all of these gimmicks.â
When Cavuto posed whether the economy might be able to grow out of the debt crisis and the looming threat of a debt ceiling Stockman pressed, âNo, you canât get a tax cut boom in 2 weeks, 5 weeks or 10 weeks.â When asked if it was about redirecting GDP and revenues he remarked, âNo. There is no chance it is going down. The first quarter GDP is coming in at 1%. This whole flurry of bullish enthusiasm that weâve had in the stock market is a farce.â
âIt will soon become clear that the tax cuts arenât going to happen, that this debt ceiling crisis is going to take down the whole system. Why did they allow $294 billion of cash to be burned up? Only $237 billion of that was to cover the inherited deficit that you canât blame Trump for but he used $57 billion in cash to lower the debt ceiling.â – Daily Reckoning
Because Congress, the White House, and especially the Fed never do what is fiscally responsible, America simply rides a proverbial roller coaster from one crisis to the next, with each subsequent one being much greater than before. Â And when you add in the turmoil that is expected to occur in Europe at the same time, it will be interesting to record the ‘body counts’ on Wall Street and in Europe if even one of these results comes out unfavorably for the economy.
Kenneth Schortgen JrÂ isÂ a writer for The Daily Economist, Secretsofthefed.com,Â Roguemoney.net, and Viral Liberty, and hostsÂ the popular youtube podcast on Mondays, Wednesdays and Fridays.Â Ken can alsoÂ be heard Wednesday afternoons giving an weekly economic report on theÂ Angel Clark radio show.