No. of Recommendations: 19
I am posting this here because there are (obvious) and necessary political implications, and such discussion is unwelcome at the other board. This is not meant to be partisan nor start food fights, and I hope long time posters will recognize me and understand this is not a trolling post. That said:
The recent fiasco in the House of Representatives offers a significant threat to the macroeconomic future of the US, and by extension the stock and bond markets in 2023. My reading (both Conservative and Liberal sources) of the Grandstanders is that while they may have settled down for a while, it will not last, indeed, It Cannot LastŪ. For the moment there is a quasi-peace, but later this year the US will bump against the debt ceiling, and this is one of the signature issues where they can use their minority power to cause havoc. And I believe, will.
To try to stop Federal spending, especially any spending they don't like, all they have to do is shut down operations in the House, and that has become trifling simple. Any single Rep can call for a 'no confidence' vote of the Speaker, and without the Speaker the House cannot move forward. (It used to take such a call from the leadership caucus, an unlikely scenario.) So if perpetually media hungry stars like Boebert, Green, or Gaetz want headlines, it's a simple call, and McCarthy has no say in it.
A 'no debt ceiling increase' would - as the mere threat of it in the past - roiled the markets, causing stocks to plummet, but *more to the point* a default of the US government would absolutely crater the bond market. Actually 'crater' is too mild a world; nuclear holocaust is probably a better descriptor.
Playing chicken with the US economy would seem to be a loser's game, but then I offer the Grandstand caucus and their lack of connection with the real world in any but the most grievance ridden anti-establishment sense as exhibit #1 in what is likely to happen. In recent years such games of chicken ended quickly enough (only after *some* damage was done) but the last few days convinced me that game might go on longer, perhaps long enough for the participants to crash head-on, at full speed.
Yes, there are scenarios where that might not happen. There are arcane - and difficult to use - House procedures, untested for a hundred years. And there is the fantasy scenario where moderate Republicans and moderate Democrats come together, although any attempt to do so will doom McCarthy as a Speaker (see: one vote 'no confidence' call, above.) If McCarthy countenances such cooperation he is doomed, immediately. If he does not, he is not really the leader anyway, and those Republicans cooperating do so at the cost of being primaried in 2024, when a national Party leader (like Trump? Santos?) will surely call them out. (Yes, there have been a few pathetic bi-partisan moves these past two years. This is unlikely to be repeated, in my view.)
So buckle up. 2023 has a reasonable chance to be the worst bond year since, uh, 2022, which was the worst in 100 years, and only the 2nd worst in recorded history.
