April 25th 2023
Here we go again…..Once again, Speaker McCarthy and the extreme wing of the House GOP, threatens to allow the United States to default on its financial obligations, unless President Biden and the Senate agree to his political blackmail. Once again we are being taken to the edge of the financial cliff.
After much political fighting, this painful dance around extending the Country’s Debt limit, for another year, will end with the Country’s credit rating being negatively impacted. This in turn will cause borrowing costs to increase once again.
The possible solution which has been presented time and time again over the past 20 years, is Congress needs to restrain spending as well as increase taxes and close tax loopholes.
When will we learn the lesson that you cannot have a strong military and provide for the education, health and safety of the population without Corporate America and wealty Americans paying their fair share of the tax burden? Over the past 20 years, the share of the annual income paid by Corporations has fallen from 18% to under 9%. The amount of wealth controlled by the top 10% of Americans has grown from 50% tp 85%.
Since the Supreme Courts’ majority has decided that “money” is the equivalent of “speech” and therefore cannot be regulated by the State or the Federal Government, we have seen a great increase in the number of politicians who cater primarily to these corrupted tax policies.
Today, we face a $31 Trillion Dollar deficit. And the interest on that debt is almost $400 Billion Dollars per year. It will not be too long before that annual interest payment will equal the $750 Billion a year that we currently spend on the entire Defense Budget.
When this financial storm hits, there will be very few “safe” places to hide. My rough guess is: Short term Treasury Bills and Gold, should be part of that short list of safe assets.
One of my key indicators is the Russell 2000 Index, (IWM) and the which gets impacted the most when credit conditions tighten. I see a giant Head & Shoulder Pattern being completed. This suggests to me we could see another stock market sell off in the coming weeks as consumer spending starts to contract. No guarantee but I would prefer being a seller on rallies, rather than a buyer of dips.