The Greatest Market Risk
by Doyle Ranstrom on Feb 22, 2023
A few days ago I was with some friends at a social engagement. One of the guys, who I consider to be a good friend and hope he feels the same way was talking to me about the economy and markets. He is very intelligent, had a successful professoinal, and is well-read in economic and market markets. He was telling me about articles written by an economist he follows discussing M-1 and overall money supply.
I think he was a little disappointed I did not follow the economist or for that matter regularly follow any economists. What I do is skim to read anywhere from 5 to 15-20 articles almost daily written by professional journalists along with independent academic/professionals including economists in a number of fields.
After a couple of minutes I turned to him and said what I believe is the greatest risk at this time to the US economy and the markets.
We had just discussed the current debt ceiling crisis. Current because it has happened before and unless we as citizens decide to elect smarter politicians, will likely happen again. As most understand, raising the debt ceiling simply means paying the US currents debts. Not raising the debt ceiling is the equivalent of a household not paying its home mortgage, car loans and/or credit cards. The result, be it the US or a household is likely the same, loss of all credit along with compete and total bankruptcy. Only a complete and total ignoramus would not understand that.
However, there are members of Congress who do not understand this and likely are complete and total ignoramuses. For example, note the following:
- A quote from Congresswoman Green [R] from Georgia: "I for one will not sign a clear bill raising the debt limit".
- However, thankfully she does not represent all of the Republican Party. Note the the quotes from former Chairperson of the Republican National Committee, Michael Steele.
- “If you understand how this works, Marjorie, then you know that this is about bills that have already been created, not new spending. So this is not a spending question. This is just paying the damn credit card of the country for the $8 trillion your president ran up between 2016 and 2020. So stop with the stupid.”
- Please remember stupid is his word not mine. I would never call any member Congress stupid, but in the court of law there are a whole lot of members I would hate to be a defense attorney defending them against the charge. Also, members of Congress pass bills, not sign them.
The real reason I believe the debt ceiling will eventually be raised is there are a whole lot of wealthy donors, individuals and corporations, who give [bribe] most members of Congress to do their bidding and they will not want the US bond and stock market to collapse.
Getting back to the start, what I told my friend what I believe the greatest risk to the economy and the markets is January 6th. He looked at me, I suspect wondering what I was getting at, Then I said the Insurrection. Ohh. I followed by stating, if the Insurrection had been successful, Trump had stayed in power by issuing military proclamation as some of his supporters urged him to do, I believe the following would have happened:
- Complete and total collapse of the US stock market along with global markets. Minus 50% would have been the bar on the way down as large institutional investors all over the world would have placed sell orders tying to convert stocks to cash at any price
- The bond market would have collapsed as the world would have lost total confidence in the credit worthiness of the US bond market.
- Civil war would have begin all over the US as pro-Trumpers who support the takeover would have classed with millions of citizens who continue to support democracy.
Sound dire? That is because it is and is not over.
According to one article, 139 Republican members who are currently in the House and also served during the last term, voted to not certify Biden's election. Keep in mind, there has never been any evidence of a fraudulent election. If fact, every challenge or review has concluded without a doubt the election results were accurate.
- Note: Dominion, manufacturer of voting machines is in the process of giving Fox News a CashEctomy. Court documents show via text messages and other communications that Fox media personalities and executives knew Trump had lost the election immediately, but supported the lie Trump to maintain ratings with their audience. This is not journalism, it is lying.
- FYI, you are judged by the company you keep.
A Republican member of Congress stated on President's Day that there should be a "National Divorce" between red and blue states. With one or two exceptions, her Republican colleagues have been noticeable due to their silence. If anyone out there, Republican, Democrat or Independent Moderate like myself, thinks that their retirement will survive a National Divorce, you are living in a city in Egypt called Denial.
- If you think this is a lone exception, the candidate for Governor in AZ who thankfully lost suggested that AZ secede from the Federal Government. Keep in mind for every dollar that Arizonians pay into the federal government, they get $1.71 back or a total of about $38 Billion.
- For the record, of the top 15 states who get the most back for every dollar they pay into the Federal government, 11 of them are "red" states. If you are getting more back then you put in, you may want to hang on to that deal.
- By the way, I would suggest the state that has the most to gain by leaving the Union as they are losing money on deal big time is California. CA residents get back $.65 for every dollar the put into the Federal Government. In fact, of the ten states who get the least back from the Federal government on a per dollar basis, 8 are "blue".
The US has done a Civil War and it was brutal and ugly. If it happens again, it would be families, neighbors, cities cities against each of these groups will contain blues, reds, and independent colors. [When did National Politics get reduced to colors?]. If it happened, I believe it would be more brutal and ugly. And I believe it would plunge our economy into depression and make recent stock market declines look like small bumps in the road.
Most of us, including economists, market forecasters, and money managers all want to believe this is politics and business as usual. I disagree, politics as usual is a debate on how to best address the deficit. This is leaders of one of the major parties supporting an Insurrection and false narrative on the election being stolen. This is different. It were to happen, and for the record, I do not believe it will, but if it did, I do believe it would lead to economic and market choas.
Finally, if you are one of those who are still an election denier, or support politicians who are election deniers and/or Trump supporters, you better be committed to the cause as you are literally risking your financial heath and financial security on it.