Setting The Timer On The Debt Ceiling… Again…

A Pfennig For Your Thoughts
 
Roctober 4, 2021
 
* Currencies & metals rally late last week… 
* We end this week with the Jobs Jamboree! 
 
Good Day… And a Marvelous Monday to you! And Welcome to Rocktober! Well, the regular season ended yesterday, and I was rooting for a 4-way tie for the Wild Cards in the American League. But all the teams failed to cooperate, and the race didn’t end in a 4-way tie… My beloved Cardinals will travel to L.A. to play the Dodgers in a one game winner moves on, game on Wednesday… It was a beautiful weekend here in S. Florida, this past weekend, and I was outside as much as possible… I can’t even begin to say how embarrassed I was for my beloved Missouri Tigers on Sasturday… Their defense couldn’t have stopped a High School offense! This is NOT the Missouri Tigers defense I grew up with, when the other teams thought the M on the their helmets stood for “monsters”… Oh, well, at least the teams I followed back then never game up 62 points in a game! The Classic IV greet me this morning with their song: Spooky, which was also done years later by the Atlanta Rhythm Section…
 
Well, there was no chaos on Friday last week… As predicted, the lawmakers saw to it to kick the can down the road even further, and the Gov’t didn’t come to a halt… The lawmakers are still arguing over what to cut from the 3.5 Trillion spendalooza… And now it won’t come to vote until the end of the month… Stupid, silly, games that people play… never saying what they mean, never meaning what they say. (Joe South)… They just keep spending money we don’t have, or will have, on things that are not needed…
 
The House voted last week to suspend the Debt Ceiling until December 2022, but the Senate is set to block that and set the timer on the drop dead date of Rocktober 18, when Treasury Sec. Yellen says the U.S. will begin to default… Don’t get caught up in all the drama here folks, in the end the debt ceiling will be raised, and we’ll kick the can down the road yet again… 
 
All this deficit spending is becoming a real problem for the U.S. folks… The lawmakers and the spin doctors won’t lead you to believe that this is all going to come back to haunt us, but it will… There’s nothing in history that can prove otherwise… I’m sorry that I don’t have the market updates right now, but this is something that I feel needs to be discussed…
 
Ok, all the silliness that’s going on in Washington D.C. makes me wonder what the heck are they arguing about? Raise the Debt Ceiling, pass the deficit spending bills, because, all this drama is just making it a smoke screen for them to do these things…  And as far as the Taper question goes… How can the Fed/ Cabal/ Cartel, taper, when their backs are against the wall? Ok, what I’m talking about here is the fact that 1. Our tax receipts don’t cover our interest expense now, and 2. Foreigners are backing away from our auction window, at a time when we need them the most! You see the dilemma here don’t you? More debt means more Treasury issuance, which if we don’t have buyers to buy it all up, who’s left to buy it? That’s right, the Fed/ Cabal/ Cartel… So, if they are buying Treasuries, they certainly wouldn’t be tapering now would they? 
 
I was reading yesterday and came across this from Matthew Piepenburg of Gold Switzerland, and this is important folks so pay attention: “With central-bank “accommodated” asset bubbles (from stocks to real estate to art) now at historically unprecedented levels, tax receipts flowing into the U.S. coffers from the ever-growing millionaire-to-billionaire class have been rising.
 
This may seem good for that punch-drunk Uncle Sam, but what no one is talking about is that despite even those “capital gain” receipts, the interest expense (i.e., “bar tab”) in D.C. is now an astronomical 111% of those same tax receipts.
 
In other words, U.S. tax income doesn’t come close to even paying interest (let alone that archaic concept known as “principal”) on growing U.S. debt obligations.
 
Can anyone say, “Uh-oh?”
 
 
Chuck again… And as far as the thought that foreigners aren’t showing up at the auction window, there’s this: Since 2020, foreigners have been selling Treasuries, instead of buying them… Have you ever wondered, why the Treasury yield continues to rise? Selling of the bonds will do that folks… the price goes down and the yield rises…
 
So, given these two things, do you really believe that the Fed/ Cabal/ Cartel, can begin to not buy bonds each month (Taper)?  As I’ve explained previously, a Tapering is basically a tightening of interest rates… And if the Fed/ Cabal/ Cartel isn’t buying the bonds, who’s going to pick up the slack?
 
Oh, and there’s much more issuance of Treasuries coming down the pike folks, as we ramp up the deficit spending bills… 
 
Ok… the markets at the end of last week moved in the direction I would have thought them to be moving all along… The dollar got sold from Thursday morning to the end of the week on Friday. The BBDXY traded on Thursday morning at 1,167.60, and ended the week at 1,161.34… That’s a HUGE downward move folks… Gold got bought both Thursday and Friday, and the price of Oil saw a rebound from the brief selloff last week, while bonds were bought, for what reason I have no idea, but they were…
 
For those of you keeping score at home, Gold on Thursday rose $31.10, and Silver gained 65-cents, and on Friday Gold gained $3.50, to close the week at $1,762.00 and Silver gained 36-cemts to close the week at $22.65… So, the end of the week was kind to the metals…
 
The currencies also saw some love thrown their way on Thursday and Friday last week, and it was all about the Gov’t’s vote to kick the can down the road on Thursday… The euro climbed back above the 1.16 handle, and all the remaining currencies followed the euro higher. 
 
The overnight markets last night… There was some follow-up dollar selling but not by a large margin. the BBDXY is trading this morning down to 1,161.01… But… Gold & Silver are getting sold in the early trading today, with Gold down $13 and Silver down 24-cents…  
 
The inflation in this country continues to rise.. This from MarketWatch last week: The cost of goods and services rose sharply again in August and left the rate of U.S. inflation at a 30-year high, with all signs pointing to price pressures sneaking into next year.
 
Chuck again… I heard a joke this past weekend that I laughed until I cried… The joker said that soon the only thing that Fed/ Cabal/ Cartel chairman Powell will see that is transitory will be his job! Apparently there are some influential folks on Capital Hill that aren’t too fond of Mr. Powell… I will say that they are directing their angst in the wrong direction… They should be directing it toward the Deep State, but then that’s just me thinking out loud…
 
I saw this blurb on Bloomberg.com on Friday, and copied it for today’s Pfennig, “Inflation in the euro area hit 3.4% in September, a 13-year high, with core prices accelerating 1.9% when volatile components like fuel and food are excluded. There’s not much hope for an easing of inflationary pressures in the short term with natural gas prices hitting another record high.”
 
Chuck again… Where’s Hans Tietmeyer? Wim Duisenberg? In case you’ve forgotten these fellows, they are former Presidents of the European Central Bank (ECB) and the Bundesbank, and they were so anti-inflation that if you looked in the dictionary for the word “HAWK” you would see their respective pictures! Germany, the Eurozone’s largest economy, has always been against any rise in inflation… And I would think that the German people are screaming from the rooftops about this rise in inflation… But the ECB just continues to sit on their hands, and allow this inflation to grow… Shame, shame, shame…
 
The Norges Bank (Norway’s Central Bank) seems to be the only Central Bank around the world that gets that inflation is soaring and it needed to be dealt with…  
 
The U.S. Data Cupboard last week had the Initial Jobless Claims for the previous week and just like the two weeks previous to last week , the number of Claims being filed increased from the week before… And once again I’ll remind you that I told you that these increases would be happening…
 
We also saw that Personal Income and Spending were two data prints going in the wrong direction.. .Real Disposable Income fell -.3%, while personal spending rose .8%…  These are not a good set of number for the economy folks, given that we’re spending more than we make….  
 
But none of these data prints were responsible for the dollar sell off Thursday & Friday last week… It was all about the kicking the can down the road, as I said above…
 
This week’s Data Cupboard is lacking at best… We start the week today with Factory Orders for August… And then there’s really nothing to talk about until we get to Wednesday’s ADP Employment report, and finally on Friday the BLS’s Jobs Jamboree for August… Right now the so-called experts are calling for a 485,000 gain in jobs for August… I don’t see how that works, given that the weeks in August saw the Initial Jobless Claims ratchet higher each week… But then it’s the BLS and I think their reports are just a description that uses their name.. .BLS…  think about that… HA! 
 
To recap… Chuck goes into a long dissertation on why the Fed./Cabal/ Cartel, can’t Taper… The currencies and metals both rallied, along with Oil, and bonds… Stocks also saw a recovery of sorts.. Inflation continues to be a real problem now and going forward… And the only thing that will be transitory is Jerome Powell’s term at the Fed/ Cabal./Cartel…
 
For what It’s Worth…. Since late last week’s selling of the dollar is still fresh on our minds, Zerohedge.com ran an article about the AAA rating on Treasuries, which I find to be quite interesting, and it can be found here: Stocks Pressured After Fitch Warns Debt Ceiling “Brinksmanship” Threatens US AAA Rating | ZeroHedge
 
Or, here’s your snippet:” As a reminder, just over 10 years ago, S&P downgraded the U.S. after that year’s debt ceiling debacle prompted the rating agency to do the unthinkable and lob an ‘A’ from the untouchable AAA U.S. rating (prompting a very unhappy response from both the market and the then-Obama administration). Well, moments ago Fitch lobbed the first official warning shot across the bow of the world’s reserve currency, writing that with the Drop-Dead Date in just 17 days, any debt-cap “brinkmanship” between Democrats and Republicans may put pressure on Fitch’s AAA rating of the U.S.
 
In the statement, Fitch said that the failure of the latest efforts to suspend the U.S. federal government’s debt limit indicates that the current stand-off could be among the most protracted since 2013. Additionally, the rating agency believes that the debt limit will be raised or suspended in time to avert a default event, but if this were not done in a timely manner, political brinkmanship and reduced financing flexibility could increase the risk of a U.S. sovereign default.
 
“It’s unfortunate when Congress uses this as a negotiating tactic, it’s a bad scenario overall,” said Randy Frederick, managing director of trading and derivatives for Schwab Center for Financial Research.
“Eventually, foreign creditors might be unwilling to buy U.S. debt and if that happens, rates are going to go sharply higher and if rates shot up because people were unwilling to buy treasuries that would have a very negative impact on the market.
 
And, as we have explained previously, Fitch also pointed out that prioritization of debt payments, assuming this is an option, would lead to non-payment or delayed payment of other obligations, which would likely further undermine the U.S.’s AAA status.”
 
Chuck again… Boy do I recall that day when the U.S. ‘s bond rating lost its AAA rating! And then the selling of the dollar lasted a while… We’ll have to see if that repeats…
 
Market Prices 10/4/2021: American Style: A$ .7279, kiwi .6968, C$ .7927, euro 1.1620, sterling 1.3590, Swiss $1.0774, European Style: rand 14.9546, krone 8.6020, SEK 8.7297, forint 306.31, zloty 3.9302, koruna 21.7893, RUB 72.92, yen 111.30, sing 1.3571, HKD 7.7862, INR 74.27, China 6.4445, peso 20.55, BRL 5.3645, BBDXY 1,161.01, Dollar Index 93.92, Oil $75.60, 10-year 1.49%, Silver $22.39, Platinum $958.00, Palladium $1,978.00, Copper $4.15, and Gold… $1,748.60
 
That’s it for today… As I said above my beloved Cardinals travel to LA. To play the Dodgers on Wednesday… The Dodgers will send their ace Max Sherzer to pitch against the Cardinals. Max is a St. Louis product and University of Missouri product… But I doubt he’ll let those home ties interfere with his task at hand… Ate dinner at friends, Pete & Karen’s last night, sat out on their balcony and talked about all kinds of things… It was simply a beautiful night! I’ll be sad to leave my winter home on Friday this week, but this coming weekend is my granddaughter Evie’s birthday… My little Evie will be 2! I do believe that she’s already into her “terrible 2’s”, but she’s so darn cute! The Charlie Daniels band takes us to the finish line today with their song: The South’s Gonna Do It Again… I hope you have a Marvelous Monday and will Be Good To Yourself!
 
 
Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts