Written by Bryan Lutz, Editor at Dollarcollapse.com:
Americans are led to believe that the US congress has two options: shutdown or slim down the federal budget. Zooming back to reality…
Before fiat, when the average, everyday American household didn’t have enough money, they were forced to make hard choices: Do you pay the rent or buy food?
Unfortunately today, the answer isn’t one or the other. The answer for most American families is to pay the mortgage or rent, and then buy the groceries with their credit card(s). All things considered, groceries, a roof over their heads, and warmth are what really matters protecting their private property. When it comes down to it, the message we’ll most likely hear will be… We were “forced to spend.”
That seems to be because we view federal institutions programs as essential, and the US economy as dependent on the fog of month-to-month economic data. Of course, without them disaster is imminent.
According to CNBC on Monday morning, taxpayers narrowly avoided “calamitous domino effect on the American public and economy:”
“The Senate passed a last-minute spending bill Saturday night averting a government shutdown that would have triggered a calamitous domino effect on the American public and economy.”
Disaster and the Delusion Dominoes
We can’t be sure what the “domino effect” would be. Aside from the deli shops in DC having to toss some of their veggie trays and meats to the local soup kitchen, and the smell of ethically grown coffee beans no longer being pressed at the Pentagon, nothing much would change.
Last week, Reuters published the potentially devastating domino list of disasters. The administrations actually affected would’ve been minuscule at best.
For example, Biden was very concerned about funding to Ukraine being interrupted.
“We cannot under any circumstances allow American support for Ukraine to be interrupted,” Biden said in a statement after the bill was passed.
The Stopgap Bill passed late Sunday night did not even consider funding for Ukraine. Perhaps what he’s really talking about is the fact that:
“Other new contracts, including renewals or extensions, would not be awarded. Payments to defense contractors such as Boeing (BA.N), Lockheed Martin (LMT.N) and RTX (RTX.N), formerly known as Raytheon, could be delayed.”
America’s two million active US military personnel would still get paid. Veterans too.
The White House would probably feel it most. During a shutdown in 2018-2019 the White House sent home 1,100 of 1,800 staff. All of which belonged to the Executive Office of the President.
The Securities and Exchange Commission (SEC) and the Commodity Futures Trade Commission (CFTC) would send most of their staff golfing for a few weeks while financial regulators would continue as business as usual.
Would this stifle economic progress?
Economic Progress?
Janet Yellen, Secretary of the Federal Reserve, says a government shutdown would “undermine” US economic progress. She’s talking about a lack of economic data.
According to Reuters the data would leave decision makers in the dark,
“The suspension of the reports would occur across all government agencies such as the Labor Department’s Bureau of Labor Statistics (BLS) and the Commerce Department’s Census Bureau and Bureau of Economic Analysis (BEA), and leave policymakers at the Federal Reserve, investors, businesses and ordinary Americans in the dark as they make key decisions.”
And it’s critical this data be available to Yellen and the rest who need months at “higher for longer” interest rates to be sure of anything. Reuters explains:
“A data blackout would come at a critical juncture for Fed officials, who opted not to raise interest rates last week but remain on guard to take more action if necessary to further rein in inflation.”
And there’s why they’ll be “forced to spend”…
In Powell’s September speech, he declared that the Fed would opt for higher for longer interest rates. This seems to be the natural consequence of inflation. However, we should remember where the inflation comes from. The Fed printed the money in the first place.
Shutdown or Slim Down Won’t Work
As the Fed continues to print more money, there’s no slow-down on federal government programs, or calls for funding Ukrainian off-shore bank accounts and the US Military Industrial Complex.
One of the major heart-wrenchers of Yellen’s political persuasion was that 10,000 children would lose access to a ‘Head Start’ program for children. I may get some flak for this: Even though I have children of my own, it is questionable why a program like this has to be federally funded…
As the next 45 days countdown, the federal budget will need to be settled. Like some American families and many in the next two years, someone will need to make hard choices on what’s really essential at the federal level. Although, I doubt there will be anyone willing to speak up and tell taxpayers “we don’t have the money.” If one person does speak up, they’ll get labeled a dictator or an authoritarian on the right. For the left, spending cuts are unheard of. But the results will most likely be more harmful than getting outed on the question of necessity.
Either way the pressures for funding will come.
Whether that comes from government programs, war, student loan repayments, commercial real estate refinancing, or banking instability…
The Fed and Federal politicians will need funding for all of the above. It’s either that, or the painful realization that the essentials are maybe not the essentials after all. But congress won’t choose that. They have taxpayers to tickle with promises that they’re competent at doing their job, and that the system works.
When it comes down to it, the loss of privilege, position, and quality of life is never something someone votes for. Neither are those losses something a family chooses. We want more… We want the American Dream…
But if the American Dream is still alive, it is in the form of fiat money. So they’ll be “forced to spend.”
