[Sarcasm alert] Recently Senator Chuck Schumer was talking about raising the debt ceiling and mentioned the 3 branches of our government: The House, The Senate, and the President [sic, the Executive Branch]. He forgot to mention the 4th branch of government, the Supreme Court, and the 5th Estate, the Press. YouTube clip here: http://www.youtube.com/watch?v=fG0Jpu9geWY
Apart from his oversights, he was talking about the bad consequences of the Republicans if they were to “shut down the government.” In fact, he mentions “shutting down the government” four times in 1 minute, 26 seconds.
He says that we “risk [spooking] the credit markets because they are very wary of the large debt we have, which we have to get down.” Apparently, he worries that the credit markets will “lose confidence” in the US Treasury if we do not raise the debt ceiling and incur even more debt (the very thing that the markets are wary of in the first place). He may be right. But he may also be quite wrong. He could even be both — right in the short term but wrong in the long.
What is most interesting to me is that he focuses only on ”shutting down of the government” and not the reason for it — that there is no more money. How do we expect our citizens to believe that there is a real and growing financial crisis if we keep kicking the can down the road? And as long as “the American people” are allowed to believe that money can be created and/or spent without consequence, why should we expect them to be fine with tax increases and budget cuts, two things that will be necessary to start climbing out of this hole?
Through our actions, we scoff at the austerity measures being undertaken elsewhere around the world — austerity measures that we in the U.S. have routinely imposed on any other country that had our financial situation, and debt and deficit ratios.
At Euclid, we see the debt ceiling issue and general political rhetoric and positioning as just a couple of the moving pieces that are moving up and down on the dancing landscape of this complex, global economic system. It is an interdependent and adaptive system with multiple possible outcomes.
How is your portfolio constructed and managed to deal with those potential outcomes? A fairly static asset allocation derived from past and possibly misleading and outdated outcomes? Are you willing to “buy and hold” yourself into financial jeopardy? We are always willing to enter into a conversation about our thoughts on the matter. Feel free to call or email.