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The Trump Cards Have Been Played
Posted at 1:15 p.m. EDT on Thursday, Oct. 10
I'm handicapped here. I never like to buy up 200 Dow points, even when it is from a much higher level and therefore a smaller percentage.
But the short base is huge. And who can blame the shorts. Until yesterday the president didn't seem to be able to budge the GOP. But nobody can handle being blamed for Social Security checks being withheld and doctors' payments delayed.
It seems that the Tea Party is very powerful in its ability to terrorize the Speaker of the House into submission, but between the haranguing of the 90-or-so members of Congress who fit the description of small-government stalwarts and the blame of delaying Social Security and Medicare, well, let's just say that trying to trim entitlements is a lot different from not paying them.
I am sure that in some corridors of the Republican Party last night it dawned on the leadership that the challenge isn't from the insurgents once the third rail is played, the challenge is from the Democrats. Even members of gerrymandered districts where social issues rule don't want their government checks delayed.
Now, again, the move is stopgap. The hatred for Obama, I am sure, grows by the day. But once played, you know the Social Security and Medicare cards are on the table and I think that makes it so the debt ceiling debate from now on will be about who wants to delay payments on Social Security and Medicare and not anything else.
I am still trying to figure out if the president and his team either didn't know how to frame this issue initially or just decided to withhold the big guns until the last minute.
Think about it. Until yesterday this was a debate about whether bond holders could be stiffed. It was about hurting Wall Street, China and Japan, the putative owners of bonds. It was about how interest rates could go up if auctions fail. That was easy for the rock-ribbed Republicans to argue with. After all, maybe they don't go up because we would have an instant recession.
In fact, this original strategy played right into the hands of the GOP. Who doesn't want to stiff the gangsta bankers from Wall Street as well as the job-stealing Chinese. The undercurrent: those rapacious capitalists, including the Chinese communists, get what they deserve ... no interest!
But last night, it became about the people who get paid benefits, benefits that will be shut down because the government can't borrow. Last night it became how the check can't be in the mail because the Republicans have decided to take away your Medicare and Social Security and that's what this has been about all along.
The Republicans are everything you always thought about America, people who think that Medicare and Social Security are socialist programs that can be cut off at the knees because of this fabulous opportunity to stop the government from borrowing. Their don't-feed-the-beast rhetoric became the equivalent of starve the elderly while you take away their medical care.
Once the debate changed, the odds of a default dropped dramatically. It may stay that way. Maybe this whole morass could have been avoided had the president played these trump cards earlier. Doesn't matter. They've been played.
They may never be put back in the deck again.
What's the Plan?
Posted at 3:31 p.m. EDT on Monday, Oct. 7
The end of the world is really hard to pin down, isn't it? What day does it end? Does it end immediately? Does it end with a bang? With a whimper?
These are the central issues. The Treasury Secretary is almost too confident everything will be resolved. The House Speaker is equally confident.
What the heck makes them so confident? The only thing that seems to get everyone focused is a drop-dead deadline, and we don't have one because of the peculiar nature of money in and money out with the federal government.
Frankly, anyone who says what the world will look like on Oct. 18 doesn't really know. You would have to anticipate what the ratings agencies have to say and what the money in the till would be and whether Jack Lew can really prioritize things.
Then we don't really know when the government needs to actually raise money. Is there an alternative way to raise money that we don't know about? Is there a way to sell property that could quickly raise money? Sell gold? It is just hard to figure out what happens Oct. 18.
But we do know what happens if we have to issue paper and we are not allowed to.
Business just stops.
It just stops everywhere.
Every part of the world.
I think you could even argue that we will be in a cash economy because everyone has to figure out what they really own and what they are allowed to own and what can't be owned, as so many businesses assume that Treasuries are risk-free.
The idea of even one day of skipped interest payments is horrendous. But what comes in that day? What do they have in the till that day vs. what can come out?
Is it better to just stop Social Security checks? I would think so. Stop Medicare payments? Absolutely. Is that the hidden agenda of some?
All I know is that it is unthinkable for the U.S. to not pay its debt.
It just puts us at the bottom of the heap and puts every institution that owns Treasuries at risk.
Which is pretty much everyone.
You can argue that because so many have them, we can, in a sweeping way, declare that everyone's going to be fine.
But I just don't see how that happens.
Until we know more, it is unthinkable. Maybe it can be thinkable if the president says what the plan is.
Right now, though, we just have an abyss and nothing to fill it.
- the Republican debate and
- resolving U.S. debt.