The cost of insuring exposure to United States sovereign debt rose on Wednesday to its highest level since 2011 after Treasury Secretary Janet Yellen warned that failure to lift the federal borrowing cap would trigger an economic catastrophe, suggesting investors are growing more nervous about the debt ceiling deadlock in Washington.
Spreads on U.S. five-year credit default swaps widened to 62 basis points, according to data from S&P Global Market Intelligence. That’s up from a close of 59 basis points on Tuesday and more than double their level at the start of the year. It’s also the highest level since 2011, according to Refinitiv data.
The United States bumped up against its $31.4 trillion debt ceiling in January, leaving it to Congress to raise the cap and allow the government to keep paying its bills.
Democrats have insisted on legislation with no preconditions to raise the debt ceiling, while Republicans have demanded spending cuts in exchange for their support to lift the borrowing cap.
Until a debt ceiling deal is reached, the Treasury Department has resorted to so-called “extraordinary measures”—basically accounting maneuvers—that allow the government to continue making payments on its debt obligations. But at some point, these will run out.
Both Washington and Wall Street are focused on what’s known as the coming “X-date,” the moment at which Treasury will be unable to issue any more bills, bonds, or notes and can only make payments on its debt obligations from tax revenues.
While concerns about a possible U.S. sovereign debt default have been evident in bond markets for some time, stock market investors have been less fazed, with the S&P 500 rallying around 6 percent so far this year.
“The chances of U.S. default remain very, very slim,” said Guy Miller, chief market strategist at Zurich Insurance Group. “However, it just takes the probabilities to rise above zero and it becomes a real issue from an investor perspective.”
Still, the price action on U.S. five-year credit default swaps suggests investors are growing more jittery and trying to hedge against the prospect that negotiations around lifting the debt cap could come down to the wire—or fall through entirely.
‘Economic Catastrophe’
Yellen on Tuesday warned that failure by Congress to raise the government’s debt ceiling—and the resulting default—would trigger an “economic and financial catastrophe” that would decimate jobs and make borrowing money more expensive for years to come.
She said it was a “basic responsibility” of Congress to raise or abolish the $31.4 trillion borrowing cap, warning that a default on the country’s debt would raise the cost of borrowing “into perpetuity” and that “future investments would become substantially more costly.”
In the event of a default, American businesses would face deteriorating credit markets while the government would probably be unable to issue payments to military families and seniors who rely on Social Security, she warned.
“This economic catastrophe is preventable,” Yellen continued. “Congress must vote to raise or suspend the debt limit. It should do so without conditions. And it should not wait until the last minute.”
President Joe Biden has, in similar terms as Yellen, insisted on an unconditional lift of the debt cap.
“America is not a deadbeat nation,” Biden said at an event in Washington on Tuesday. “We pay our bills.”
Republicans have been seeking to tie spending cuts to their support for raising the borrowing limit.
As a basis for negotiations, House Republicans last week introduced legislation to raise the debt ceiling by $1.5 trillion while laying out a series of spending cuts amounting to roughly $4.5 trillion.
House Speaker Kevin McCarthy (R-Calif.) has been working to shore up support for the GOP proposal, called the Limit, Save, Grow Act of 2023.
McCarthy has hoped that passage of the Republican plan would drive Biden to the negotiating table, something that the president has refused to do.
“Remember what this bill is. This bill is to get us to the negotiating table. It’s not the final provisions,” McCarthy told reporters on Tuesday on Capitol Hill.
The Republicans’ 320-page bill calls for returning discretionary spending to 2022 levels, capping spending growth to 1 percent per year, and repealing certain tax credits.
Biden has expressed opposition to the GOP proposal and insisted on a clean bill with no preconditions on raising the debt cap.
Coffee the Christian way: Promised Grounds
Biden Threatens Veto
The House could vote on the GOP bill as early as Wednesday, though it’s unclear if it has enough support from Republicans to pass.
Several Republicans have expressed opposition to the bill, with some saying it doesn’t cut spending deeply enough while others worry about the impact on their constituents.
McCarthy can only afford to lose four votes from the Republicans’ slim 222–213 majority for the measure to clear the House.
The White House on Tuesday voiced its opposition to the GOP measure. In a Statement of Administration Policy (pdf) the White House called the Republican bill “a reckless attempt to extract extreme concessions as a condition for the United States simply paying the bills it has already incurred.”
“This legislation would not only risk default, recession, widespread job loss, and years of higher interest rates, but also make devastating cuts to programs that hard-working Americans and the middle-class count on,” the statement continued.
“Therefore, if the President were presented with the Limit, Save, Grow Act of 2023, he would veto it,” it added.
GOP Debt-Ceiling Plan
Besides decreasing Congress-approved annual spending to $1.47 trillion and capping spending growth at 1 percent annually over the next 10 years, the Republican plan features a series of other measures, including canceling Biden’s student loan forgiveness program.
The plan would also take back unspent COVID-19 relief funds, remove barriers to increased domestic energy production, and reimpose work requirements for many people collecting welfare.
It would also cancel the remaining money from the $5.2 trillion in COVID-19 relief programs Congress approved between 2020 and 2022. According to the White House, less than $80 billion of this remained unspent in January, with most of the money earmarked for union pension funds, veterans’ health care, and medical research.
Biden’s efforts to cancel around $400 billion in student debt are also on the chopping block. Republicans have argued that the student debt wipeout is unfair to those who didn’t rack up loans to go to college or who sacrificed to pay off their debts.
The plan would also repeal incentives for renewable energy, electric vehicles, and other supposedly green technologies that Democrats passed last year as part of the Inflation Reduction Act.
The proposal would also give Congress more power to review new rules put forward by the executive branch, potentially giving Republicans more power to block regulations they consider detrimental.
The package includes a fossil-fuel bill aimed at promoting energy development on federal lands, reducing regulations, and eliminating Democratic-backed climate incentives.
“If Washington wants to spend more, it will have to come together and find savings elsewhere, just like every household in America,” McCarthy said on the House floor last week.
“President Biden has a choice. Come to the table and stop playing partisan political games, or cover his ears, refuse to negotiate, and risk bumbling his way into the first default in our nation’s history,” McCarthy added.
Democrats have argued the Republican plan would bring an estimated 22 percent reduction in many social support programs.
“Default would be totally irresponsible,” Biden said Tuesday. “It would mean cuts in Social Security and Medicare, higher interest rates for your credit cards, car loans, mortgages.”
“The entire economy would [sic] put at risk.”
Article cross-posted from our premium news partners at The Epoch Times.
Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.
