The agreement between the White House and the Republican leaders of the US House of Representatives to raise the national debt ceiling has caused a storm of emotions
And this despite the fact that few experts in the financial sphere and American politics thought a default, especially in the current political situation, was possible. Emotions ranged from a faintly concealed sigh of disappointment to accusations of treason by Republican leaders. The latter, however, is not unreasonable: even for the Default Sceptics it remains unclear why it was necessary to bring matters to a full blown political crisis, to create, largely artificially, political tension, only to then so ineptly drain all political positions, dealing a blow to the reputation of their own party.
And it is not just about the colourless Kevin McCarthy who became Speaker of the House of Representatives as a result of backroom deals. No one expected anything from him.
On an emotional level the observation of reactions to the resolution of the debt crisis in the USA makes one conclude that the number of people who wish “good” for the modern USA, who want the “beacon of democracy” to sink into a systemic crisis, preferably a hopeless one, is already past the critical point. Which, by the way, explains the difficulties that haunted Washington in forming the “coalition of democracies”. This at least demonstrates the potential of de-dollarisation in today’s world.
Putting aside emotions, there are three conclusions.
The first. The “deep state”, the U.S. financial oligarchy, had to say its word, and it has said it, giving several important signals. And the fact that the systemic crisis of the dollar economy has been “postponed” without any convincing mechanisms to resolve it is also a signal.
So when it is said that the “collective Biden” administration has been unleashed until 2025, i.e. beyond the current political cycle, it is worth asking: Why has the White House been unleashed? Because the further away, the fewer possibilities there will be for resolving the situation through economic mechanisms. Already now there was substantially more “political” content than economic. And the political can quickly become military-political.
Second. The USA cannot afford even relatively gentle manoeuvres with the dollar right now, such as a sectoral default on certain groups of obligations. U.S. behavior is very different from how brazenly it behaved in the early 1970s when it refused to peg the dollar to gold (the so-called Nixon shock), when the political situation seemed substantially sharper: The Vietnam War was raging and the Soviet Union was reaching strategic parity with the United States.
So things were still sharper. And the mechanism of circulation of the government debt and the derivatives issued on its basis makes it very difficult to separate “outside” and “inside” holders. And inside the US the bond holders are pension and investment funds that directly influence the “independent” Fed. These ‘investors’ are very sharp in their political behaviour.
Third. Donald Trump’s return to the presidency is not just possible. It is a risk to the entire American political system, including the Republicans, seemingly creating a new bipartisan consensus.
There should therefore be no financial crisis, no new Watergate against the Biden family (it is telling how the touted investigations are beginning to wind down), and the 2024 election itself will, if Joe Biden’s own biological resources permit, be plebiscite in nature, making the stakes super-high. And they will have to be raised not only on the foreign circuit, but also in the US itself. So the image of both Republicans and Democrats, of Congress and of the electoral system as such will be of less and less interest to the ruling oligarchy in Washington. The main thing is to save the system. At any cost, and not at their own expense.
Dmitry Yevstafyev, RT
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