US Government Shutdown

The theatrics of negotiations between Democrats and Republicans over excessive spending continue at the White House this weekend.

A coalition between House speaker and McCarthy (who speaks about himself in press sessions) and the Democrats reached a short-term measure to keep the US government open as did the more recent one with Mike Johnson (R). All to prevent government shutdown where Dems might lose their paychecks. The fact is, this government is so corrosive and damaging with its out-of-control spending, that a long shutdown would likely benefit Americans.

The lies and caustic rhetoric of the Dems has worn down Americans and many other nations so a media blackout of that misery could do the country a tremendous amount of good. Just not seeing Biden stumble and botch messages would be a plus. The illegal immigration/border fiasco is coming full circle back to roost to the Dems who have left the border open.

It turns out the Trump wall and Trump tariffs were the best idea. And the Dems are reversing their views on letting illegals in.

Deep Fiscal Panic

These short term measure kick the debt crisis down the road, this time untill January or February. The fact remains, the US government is deep trouble with lower tax revenues and tragically dependent on high treasury interest rates to fund its extreme spending. As the Dems have said, the debt ceiling must keep rising.

The crux of the whole matter is out-of-control spending which has resulted in a $2 Trillion deficit for 2023, and a $1 Trillion in interest-only paymens — an amount that makes Jeremy Grantham look like a legit market prophet. Previous deals and bills weren’t adhered to so any deal made with the Dems is unreliable. The debt now is $33+ Trillion and I started railing about it back when it was $20 Trillion.

The growing debt emergencies are spawning more crash talk on the web and TV now, with the economy cooling, tax revenue dropping, despite lower inflation, with the FED talking tough about higher for longer, showing no mercy.

But is this event crucial for government rehabilitation and setting the stage for a profitable 5 years ahead for investors? Is it the best thing that could happen for the country? We’ll explore that now.

The 6 month and 3 month forecast for stocks is subdued. Corporate earnings are going to fall in the next 2 quarters. See more on the full 3 month to 5 year forecast outlook.

For stock buying enthusiasts and fund managers, this presents a rare golden investment opportunity. Because the prediction is for improvement as we head toward 2025 — post Biden.

This is all about profligate government spending, an increasing debt interest crisis, and agreeing on a bill that would allow the government to continue. It’s about the Dems not building an economy that can stand on its own without Trillions in support payments.

Yet Matt Gaetz and other Republicans are stubbornly holding out for a better outcome. Gaetz was intent on ousting Kevin McCarthy as speaker due to his continuous capitulation to Democrat spending. McCarthy isn’t standing up for full government responsibility. And his impulsive gesture to avoid a short government shutdown is highly suspicious.

Matt Gaetz Fights to Hold People Accountable

(R) Representative Matt Gaetz from Florida explains the issue with CNN on Twitter.

“House conservatives made @SpeakerMcCarthy agree to spending guardrails in January. He has blown through those guardrails, which is what brought us to this moment.”

“The only way to save America from financial ruin is to pass single-subject spending bills that are able to be…” pic.twitter.com/cGlmqsbf9v

— Rep. Matt Gaetz (@RepMattGaetz) September 29, 2023

Is a Crash the End Game for Biden’s Spending Spree?

Experts would say the spending will continue. But it won’t without a fight this time. This mess is the result of Democrats’ out-of-control spending, much of which ends up in China, or creates more debt, pushing the US to the brink of insolvency. A key sticking point is $44 billion more in aid to the Ukraine which will not stop Putin’s attacks. The Democrats refuse to protect the US’ own border as Fentanyl, guns, terrorists, spies, and illegal immigrants flood in at record rates.

While the circus continues, let’s talk about what a government shutdown and decreased Democrat spending would do.

A government shutdown would impact a lot of people who depend on social assistance payments and pensions. Those companies that live off government spending would be affected, and cities such as Washington DC would see a sudden crisis in their local economies.

Police and military protection will be impacted, thus making it an opportunity for criminals and US enemies to strike.

The End of Massive Spending that’s Causing Inflation?

It’s generally understood that what’s causing the Government’s fiscal misery and America’s high-inflation is the Biden White House’s massive spending, which collectively amounts to at least $3 Trillion more and is being dispersed into the economy now.

The Dems don’t want to agree to any reductions to their spending projects while the Republicans appear to be drawing a line. This leads to a worrisome debt payment default and a long government shutdown.

But is this all a really good thing for the economy, housing market and stock market? Will it kill inflation? Will it cause America to refocus on itself and its own well being?

Long run, I believe it is good. With a sudden downturn in spending and predicted spending by Biden, inflation would fall fast, and the FED would pivot on the FED lending rate. That means lower credit and mortgage payments along with easier access to money for businesses.

The easing of the cost of living and cost of business would end a lot of economic misery for consumers and small business. It would also end speculation which adds to higher home prices. A sudden drop in prices would also end profiteering by companies who keep raising prices because they can and want to.

The whole cycle of inflationary misery would end. It’s a vital break where the economic and political reset button can be pushed.

Why a Shutdown Is a Good Thing

Investors in the stock market would love to see a block of spending. It would slow the economy, reduce inflation and then the FED could reduce the lending rate. Businesses and the economy might resume normal investment, building, and growth plans.

Reasons why It Might be Beneficial:

Investor’s projection of future value would rise fast, and they would move money away from the money markets over to the equity markets.
With less money flowing out, spending government decreases meaning the economy and demand would shrink, thus lowering prices for housing, consumer goods, energy, and services, thus wages would fall and unemployment will rise.
The housing market would be stimulated as home prices fall allowing locked-in homeowners to sell their homes finally.
risk of a housing market crash will cause buyers to withdraw bids and cool down home prices.
the multifamily sector might collapse thus sending prices of rentals crashing, along with high rent prices.
a shutdown would lower the US government’s credit rating so it wouldn’t be able to borrow so much, thus stopping a dangerous addictive routine which could collapse the country.
a debt payment delay and default fear would be increased thus forcing a change in tolerance for bad financial management by the Biden regime.
the government would see its tax revenue fall even further thus it would need to cut profligate spending.
a mild recession would help lower energy prices and encourage more output from energy producers so they can maximize their own profits and pay their bills.
a recession and shutdown combined would end confidence in Joe Biden and Bidenomics which have been a miserable failure for America.
a sudden economic shutdown with bankruptcies and unemployment would force Americans to reset their financial accountability and stop being foolish with how they spend.
wages would fall to help small businesses who can’t afford the spiral of costs they face.
workers would stay put in their current jobs and commit to better performance for their employers.
travel plans will be canceled thus resulting in lower airfares, hotels, and restaurant meals.

Shutdowns and spending cuts create hardship on the wrong people, but a change in government is needed. This crisis is an opportunity to force change in how the US government prints money, especially on political projects of dubious value.

This crisis helps Americans take stock of what they’ve let happen to this great country. That and the end of deceit mean the outlook for the economy and stock market are brighter. Hopefully, the Republicans can agree to put a stop to it, and prepare to win the Presidency in 2024.

See more on the stock market outlook for the next 3 months, 6 months, and 5 years.