Normal
Dan denning has written on a similar vein to Duc above, focusing on the perfidy of Janet Yellen. Politics in the US are so poisoned that each change in admin sees the outgoing ba$tard$ making as much difficulty as possible for the incoming ba$tard$ as possible, even if it is bad for the US economy.MickAround the time I published my weekly research note to paid subscribers about the coming ‘day of reckoning’ for the US dollar (The Dollar Frontier), US Treasury Secretary Janet Yellen committed one last act of fiscal sabotage before leaving office on Monday. Yellen sent a note to members of Congress stating she had begun to take ‘extraordinary measures’ to prevent the US government from defaulting on its debt.The measures don’t seem all that extraordinary. The government will temporarily suspend the funding of retirement benefits and pensions for civil servants and postal employees. But if the government wants to issue new debt, it will have to remove the debt limit it hit on January 2nd. This sets up a fight between the new President and Democrats in Congress.Yellen said the new measures will begin Tuesday, January 21st, the day after Donald Trump’s inauguration. She added this:Is the moment of truth?The day of reckoning for the dollar?In every other past debt ceiling crisis, the debt ceiling has been raised and Washington has continued to spend money out of an empty pocket. The only difference, this time, may be that the debt ceiling itself is completely removed as a barrier to new spending (it’s not a very effective barrier, clearly).The bigger story to watch will be whether a strong US dollar continues to draw capital into big cap US tech stocks like a magnet, driving US stocks to even higher historic valuations. US stocks are worth a combined $60 trillion, over 200% of GDP— or ‘strongly overvalued’ according to Warren Buffett’s famous ratio.If the dollar weakens—because of a debt crisis, because of interest rate cuts by the Fed, or because of a negative market reaction to Donald Trump’s tariffs—this could lead to a sudden and large correction in overvalued US stocks. Be prepared for anything.
Dan denning has written on a similar vein to Duc above, focusing on the perfidy of Janet Yellen. Politics in the US are so poisoned that each change in admin sees the outgoing ba$tard$ making as much difficulty as possible for the incoming ba$tard$ as possible, even if it is bad for the US economy.
Mick
Around the time I published my weekly research note to paid subscribers about the coming ‘day of reckoning’ for the US dollar (The Dollar Frontier), US Treasury Secretary Janet Yellen committed one last act of fiscal sabotage before leaving office on Monday. Yellen sent a note to members of Congress stating she had begun to take ‘extraordinary measures’ to prevent the US government from defaulting on its debt.
The measures don’t seem all that extraordinary. The government will temporarily suspend the funding of retirement benefits and pensions for civil servants and postal employees. But if the government wants to issue new debt, it will have to remove the debt limit it hit on January 2nd. This sets up a fight between the new President and Democrats in Congress.
Yellen said the new measures will begin Tuesday, January 21st, the day after Donald Trump’s inauguration. She added this:
Is the moment of truth?
The day of reckoning for the dollar?
In every other past debt ceiling crisis, the debt ceiling has been raised and Washington has continued to spend money out of an empty pocket. The only difference, this time, may be that the debt ceiling itself is completely removed as a barrier to new spending (it’s not a very effective barrier, clearly).
The bigger story to watch will be whether a strong US dollar continues to draw capital into big cap US tech stocks like a magnet, driving US stocks to even higher historic valuations. US stocks are worth a combined $60 trillion, over 200% of GDP— or ‘strongly overvalued’ according to Warren Buffett’s famous ratio.
If the dollar weakens—because of a debt crisis, because of interest rate cuts by the Fed, or because of a negative market reaction to Donald Trump’s tariffs—this could lead to a sudden and large correction in overvalued US stocks. Be prepared for anything.
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