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If No Debt Ceiling Deal By Early June, Stocks Crash, The Economy Implodes, And...

If No Debt Ceiling Deal By Early June, Stocks Crash, The Economy Implodes, And Social Security Payments Don’t Go Out



We are being warned that there could be some real serious economic doom at the beginning of next month if the Democrats and the Republicans cannot agree on a deal to raise the debt ceiling. Experts are telling us that the stock market will crash, the economy will immediately plunge into a recession, and tens of millions of Americans will not get their Social Security payments. Treasury Secretary Janet Yellen says that a U.S. debt default would begin somewhere around June 1st. She can’t nail down the date precisely, because there is some uncertainty regarding how much tax money will come in over the next few weeks. But what is exceedingly clear is that time is very short, and there are only four days when the House and the Senate are both scheduled to be in session before June 1st. So the clock is ticking, and right now both sides are still far apart on any sort of a deal.


Of course the Republicans in the House have already passed a bill to raise the debt ceiling, but it is not acceptable to the Biden administration.



The Biden administration has chosen to play hardball, and so we really are facing the possibility of a nightmare scenario. The following description of what could be ahead comes from the Washington Post

Federal workers furloughed. Social Security checks for seniors on hold. Soaring mortgage rates. A global financial system sent reeling. Leaders from Congress and the White House are trying to forge an agreement to lift the federal debt ceiling, with only a few weeks before the Treasury Department may no longer be able to avert an unprecedented U.S. default. If they fail, and the government can’t meet its payment obligations, economists and financial experts predict chaos.

According to the Post, there are 7 major things to watch for if a U.S. debt default actually happens…


-Stocks crash


-A sudden recession


-Federal workers in limbo


-Social Security and Medicare miss payments


-U.S. borrowing costs soar


-Economic problems spread worldwide


-The dollar drops, along with U.S. prestige


The severity of the crisis will depend upon the duration of the default.



If the federal government can’t meet its obligations for a few days, it won’t be a very big deal.


But if there is no deal for several months, things could get really crazy. In fact, the White House is projecting that stock prices could fall by 45 percent

Moody’s Analytics has estimated that stock prices could fall by roughly one-fifth, wiping out $10 trillion in household wealth and devastating the retirement accounts of millions of Americans. The White House has estimated that the decline could be closer to 45 percent.

That would be quite a crash.


And imagine what our country would look like if over 60 million Social Security recipients did not receive any payments for several months.


People would be going out of their minds.


The longer a debt ceiling crisis lasts, the more pressure the American people will put on their politicians.


And I think that it what the Biden administration is counting on.



Of course there are many Democrats that actually want Joe Biden to invoke the 14th Amendment in order to avoid a debt ceiling crisis altogether…

The 14th Amendment, passed by the Senate in 1866 shortly after the end of the Civil War, states “the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

Biden says that he has been “considering” such a move, but Janet Yellen is publicly telling reporters that it would be “legally questionable”

“I have been considering the 14th Amendment,” Biden told reporters Tuesday after meeting with congressional leaders at the White House and making little progress on the debt-limit stalemate. Treasure Secretary Janet Yellen last week, however, acknowledged serious problems with the 14th Amendment as an answer to the debt crisis. “There would clearly be litigation around that; it’s not a short-run solution,” she said at a news conference in Japan, adding it would be “legally questionable.”

We shall see what happens.


In the end, I don’t think that Biden will try to use a tortured interpretation of the 14th Amendment to end this crisis.


Instead, I believe that he will simply wait for the Republicans to fold like they always do.


For decades, Democrats have watched Republicans fold like a 20 dollar suit whenever some major deadline approaches.


And there are some Republicans that are already talking like they intend to fold this time around too…

House Foreign Affairs Committee Chairman Rep. Michael McCaul, R-Texas, said Sunday he does not think the United States will default on its debt. Appearing on ABC’s “This Week,” McCaul said he was optimistic the nation would raise the debt ceiling by June 1, noting that defaulting would embolden the country’s adversaries. “Our adversaries look at this very closely. They look at when we’re divided. … I think they would love nothing more, particularly China, to see us default in our full faith and credit under the Constitution,” McCaul said. “I think defaulting is not the right path to go down.”

But there is one key difference now.


Kevin McCarthy is the one holding the cards for the Republicans, and he does not intend to be steamrolled like other Republican leaders have been in the past.


There are certain things that he wants, and at this moment he is saying that there will be no deal if he does not get them.



Having said that, I still expect the Republicans to fold.


I just can’t help it.


I have seen it happen time after time, and it is clear that many of them simply do not have a stomach for this sort of a fight.


So I believe that doom will be averted because the Republicans will eventually cave in and give the Democrats almost everything that they want.


However, I have to admit that there is a chance that I could be wrong about this.


Maybe Kevin McCarthy and his team are made of sterner stuff than I suspected.


If that turns out to be the case, you will want to keep a very close eye on early June, because that is when things would start to get really “interesting”.

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