Wall Street Is Beginning To “Fret” Over The Debt Ceiling! It Should Be, As This “Drama” Can “Tear” The Global Economy Apart!

It is that time of the year again! When the almost annual “ritual” of raising the Debt Ceiling crops up in the United States, with each passing year adding yet another layer of “uncertainty”. Indeed, ever since the Republicans became the party of “obstruction” for the sake of obstruction and gave up all “pretences” of governance, the Debt Ceiling “drama” has become more intense and fraught with “risks”. Though in the end, all was well with the “compromise” reached in the “nick” of time, this time around, the “stakes” are infinitely higher than the previous iterations, including the 2011 “fight” that nearly crashed the global economy. Maybe this is why Wall Street is starting to feel “nervous” about this year’s edition of the Debt Ceiling showdown, with major banks sounding alarms about why it is “different” this year.

The global economy certainly can do without this. Already reeling under Inflation, Putin, and a looming recession, the last thing Wall Street and global investors want is the “risk” of a catastrophic default by the United States. It would “sink” the global economy and “tear” the world apart. Let us see why the global economy might well and truly collapse this year. For one, remember that any “default” by the United States on its debt affects the domestic economy and the broader global economy since foreign entities hold substantial amounts of Dollar denominated debt. Of course, a “simple” default would yet be manageable if only the situation is not “complicated” by the fact that the USD (United States Dollar) is the world’s reserve currency and “underpins” the global economy to the extent that “everything goes down” if the almighty Dollar goes down.

So, given these imperatives, Wall Street watches each year’s spending battles and debt ceiling fights, and it is only “fair” that they are beginning to “worry” as they have “skin in the game”. Not only would a debt default “crash” markets, but it would also be calamitous for bonds and other instruments “linked” to the USD. Indeed, I would go so far as to say that Financial Armageddon is what it would be if the US defaults. This begs the question of why the Republicans would “intentionally” wreck the global economy. Is it yet another wave of “wealth” destruction they want after the populism, pandemic, and Putin? Or, is it that they want only the Top 1 per cent to “survive” the economic cataclysm, with their investments “ringfenced” and their “bunkers” ready to host them? Whatever their thinking, it is just not done to hold the global economy “hostage” like this.

There is a sliver of silver lining here, and that is perhaps. The Great Unraveling, currently underway towards “sound” money, would be the eventual outcome. Again, this can be wishful thinking as The Great Reset or the rebooting of the global economy is still in the realms of the thought processes of the Davos crowd, and I don’t know if this is what would happen. Talking about Davos, Klaus Schwab, the chief of the WEF (World Economic Forum), which hosts the annual talkfest, is on record for suggesting a “transition” to the Fourth Industrial Revolution (he has authored a book on this as well). Maybe, a complete “crash” would finally give “them” the chance to “refashion” the global economy. Of course, as I mentioned earlier, this is “magical” thinking and not certainly in the works, as Wall Street would be “in the know”.

So, where is this leading? Already the global economy has nowhere to “hide”, and if the Debt Ceiling brings the “chaos” into the “open”, it is anybody’s guess as to where it will be by fall 2023. Worse, the global economy is too “stressed”, and “frazzled” to withstand a Lehmann-like “shock” and is now a “ticking” time bomb. I bet we would be (or already are in) a “slow motion” collapse with the Coda arriving by September. This certainly is not the Utopian “promise” of the Davos “movers and shakers” who, along with Wall Street, are already “fretting” over the Debt Ceiling. Maybe, the Republicans are plain “renegades” gone rogue, though it is hard to believe since they count “very wealthy” among the aforementioned “elites” as their donors. For the sake of all, this “game of chicken” must stop before it is too late!


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