Hard line Republicans’ wondering about refusal to raise Fed. Debt

Hard line Republicans’ wondering about refusal to raise Fed. Debt

obama_immigration-300x180It is and forever will be times such as the one the USA is currently in that many believe will make or break us as a nation. You betcha it is that time again when President Obama and all of his corrupt and crony business as well as political juggernauts must face the music.

In an attempt to write for the massive amount of Americans’, all illegal aliens, and illegal/or undocumented immigrants to allow these people to understand what is coming up upon them. And that is a renewal of the 2008 economic crisis.

Therefore, what is there to say? Normally, people do not come to this cite to read about intricacies happening within our government. So it seems that although most of us do not know what we are talking about, let us look at recent history with an attempt to see what those hard-lined Republicans’ have done to prevent a recurrence of this nation’s continuing debt crisis. Most recently — and one’s options are completely open to fling attribution (blame).

For whatever reasons a small group of existentialists got together and more than half influenced Rep. John Boehner, R-OH that there would be no changes in current “spending practices and that the Iran Nuclear Deal” was going through.

Even with the multitude of lies told this nation’s citizenry and visitors; moreover, lest we ever forget that it was this president’s uncontrollable spending and massive 2 to 3 trillion in debt that caused enough people in the country to vote in a new congress to reign in Barack Obama. It only goes to show that congressional officials do not know what they’re doing and unfortunately we are all going to pay.

The impasse in Congress caused by hard-line Republicans’ refusal to raise the federal debt ceiling is becoming a real threat to the economy, and the market is simply not appreciating its potential severity, said Aaron Kohli, interest rate strategist at BMO.

mula“If you get a situation where the debt ceiling is actually reached or breached, I think the amount of volatility in stocks and even in bonds to some extent will be very extreme,” said Kohli.

Kohli added that the worst part about this type of volatility is that it’s difficult to predict the resulting winners and losers in the stock market.

“Not only will the potential losses be random, you could have perfectly safe institutions suffer losses, but you may also have a situation where some equities do better and others do much worse depending on the cash positions and the safety of the securities versus the fact that the U.S. Treasury may actually not pay its debt,” said Kohli.

Kohli said the Federal Reserve will be forced to step in if Congress fails to resolve the debt ceiling situation. One potential result of a prolonged debt crisis could be a delay in the Fed rate hike until much later in 2016, which would ultimately send stocks higher. He said the Fed is ready to hike rates, but is fearful of exogenous events like a federal debt default.

One idea suggests that capital markets have added much more debt than the Fed has big bucksremoved via its QE program. Kohli said the absence of inflation means investors could be stuck in a trap where the markets add more debt than the Fed buys, leading to even more leverage after QE than before. And it’s not just a problem here in the U.S., in his opinion.

“Countries like China have massively increased debt over the last few years,” said Kohli. “The real question you have to ask is what happens to these same borrowers when their rate of borrowing actually increases and the picture is clearly not pretty.”

american eagle with flagWith this debt ceiling debate on the horizon, Kohli said allocations to Treasuries and safer equities are the better path for investors. He added, however, that the important thing for Treasury buyers is to avoid those that have payments in the near future, because those are the ones that suffered most the last time this occurred.

“Broadly, the Treasury market will do very well because of the secondary impact that it has on the economy, the negative effect that it will have,” said Kohli.

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About Jon-Paul

Academia, Constitution, Musicianship, all around Caucasian male, straight, and professes Jesus Christ as the Lord of my life. Guitars -- Classical, Acoustic, A/E, Strat, a real bassist at heart, Les Paul Standard bass.
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