AGF Management : Grasping at Straws — Could a Platinum Coin Be Part of a Debt Ceiling Deal?

Insights and Market Perspectives

Author: 8

September 29, 2021

Grasping at Straws -
Could a Platinum Coin be Part of a Debt Ceiling Deal?
September 29, 2021
IT'S IMPOSSIBLE TO OVERSTATE the sense of anger on Capitol Hill - Democrats are furious with moderates Joe Manchin and Kyrsten Sinema, who won't disclose what they want; Democrats are even more furious with Mitch McConnell, who won't even help them on the terms of surrender.

THIS FOUL MOOD has prompted some Democrats to grasp at straws on the debt ceiling:

Kill the filibuster? Not gonna happen.

Give the Treasury Secretary authority to raise the debt ceiling? No votes for that.

Mint a trillion dollar platinum coin to pay for a debt ceiling hike? Don't bet on it.

Impose the 14th Amendment to the Constitution, which allows a president to pay all debts? Unlikely but not out of the question.

THE MERE FACT THAT SOME MEMBERS OF CONGRESS are considering a platinum coin makes it clear that the most rational option - attaching a debt ceiling hike to a budget reconciliation bill - is now viewed as risky, because that could take weeks and the U.S. could be near default by the end of October (or sooner).

THE ONE MISSING INGREDIENT UNTIL YESTERDAY was an angry stock market, but Congress finally got that - which, Democrats hope, will prompt financial and business leaders to urge McConnell to relent.

A POTENTIAL IRONY: McConnell has dug in his heels on the debt ceiling because he wants the Democrats to take all the blame, but there's a growing realization that McConnell himself is part of the problem, not the solution.

[OF COURSE, THE MARKETS FELL YESTERDAY not because of anything Janet Yellen or Mitch McConnell said. The big Wall Street story is rising interest rates as anxiety over an economic slump dissipates - thanks largely to a realization that Covid cases have leveled off.]

THE GOOD NEWS IN WASHINGTON THIS MORNING is that a government shutdown, which could hammer consumer and market psychology, still looks unlikely. We expect a deal, perhaps today, that will keep the government open until early December.

THAT'S JUST ONE OF THREE ISSUES TO BE RESOLVED: Frantic negotiations will continue on the debt ceiling, which McConnell insists must be addressed by Democrats (the dispute, frankly, is over the Democrats' terms of surrender, not an easy task if there's only three weeks before default).

IN THE MEANTIME, DEMOCRATS APPEAR TO BE HOPELESSLY GRIDLOCKED on the other big issue - passage of the two infrastructure bills. As always, we'll carefully watch Nancy Pelosi today; will she schedule a vote tomorrow if House progressives have the votes to block her?
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WE WATCHED MUCH OF THE REMARKABLE hearing yesterday on the Afghanistan debacle, and there was one clear take-away: the Generals clearly wanted to keep a small force on the ground, and repeatedly urged Joe Biden to not withdraw precipitously. Biden has said he never got that advice and - quite clearly - he's not telling the truth.

AFTER FOUR YEARS of Donald Trump's outrageous mendacity, there was hope earlier this year that Biden would be different. But when cornered this summer, Biden dragged out the slippery phrase "not to my recollection" - which speaks volumes about his willingness to twist the truth.

The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

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