Creative destruction and disaster capitalism continue a deadly monetary dance. Donald Trump’s recent embrace of cryptocurrency, which is dominated by the most reactionary and stupid representatives of the tech industry, have made financial manipulation even more of a partisan issue.
The right wing is better at it, despite effective altruism and its recent failures like Sam Bankman-Fried.
It all might turn out to be a misstep, or part of an attempt to leverage profit from another J6-style insurrection. There’s more ahead than defeating Trump with the prospect of a Project 2025. Its ready-to-go putsch of the administrative state on 2025 simply waits for the seditious delays that might occur with new GOP shenanigans.
They got close in 2020/2021 and may have actually learned enough to try J6 again with a different strategy. One key could be raising the debt limit to the moment when “the peaceful transfer of power” happens. Sounds like a conspiracy-theory, but who would have thought a sitting POTUS would try to decertify an election in a democracy in order to remain in power, (again).
As much as one might claim that it’s unprecedented, debt defaulting has occurred in US history, although admitting it seems to be a feature and not a bug of financial history.
Between the attempted assassination of Donald Trump, Joe Biden’s withdrawal from the race, and the rapid coalescence around Kamala Harris as the presumptive Democratic nominee, everyone’s rushing to update their political calculus. But there’s one recurring thread that haunts us that people aren’t yet talking about: the debt ceiling, which must be addressed once again by January 2nd, 2025.
As... reported in The Washington Spectator previously, any default on US debt would be unprecedented, sparking a global catastrophe with unpredictable outcomes. How soon we forget — in 2021 Moody’s estimated that default could mean the loss of at least 6 million jobs and the destruction of $15 trillion in wealth. (The COVID bailout packages amounted to about $4 trillion, by comparison.)
THIELISM
J. D. Vance’s selection as Trump’s running mate suggests that Vance’s benefactor, Peter Thiel, is running the show, reprising an aborted effort to run the show from 2016. He seems to have learned from his mistakes. Thiel’s main hook into the first Trump administration was Steve Bannon, and their efforts were largely stymied by Ivanka Trump and Jared Kushner and other advisors; Bannon was ultimately forced out and left the administration after the deadly white supremacist “Unite the Right” rally in Charlottesville in August 2017.
In The Contrarian, a 2021 biography of Thiel, author Max Chafkin describes Vance as an “extension” of Thiel, who was a primary funder of Vance’s victorious 2022 race for Senate in Ohio. If Trump wins, Vance will be a heartbeat away from the presidency — and that should give everyone palpitations of their own.
A new Congress will be sworn in on January 3, 2025 — one day after we hit the debt ceiling. The Treasury Secretary (presumably Janet Yellen) will then again have to enact “extraordinary measures” to avoid default. That may buy us anywhere from a few weeks to a few months, depending on who is elected President, and who is appointed Treasury Secretary.
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There are always extraordinary measures possible. Like effective altruism and its covert trickle-down message, the churn of budget and debt, plus the shadow of insurrection may perfect a seditious storm.
If the United States government did default now, it would be the fifth time, not the first. There have been four explicit defaults on its debt before. These were:
- The default on the U.S. government’s demand notes in early 1862, caused by the Treasury’s financial difficulties trying to pay for the Civil War. In response, the U. S. government took to printing pure paper money, or “greenbacks,” which during the war fell to significant discounts against gold, depending particularly on the military fortunes of the Union armies.
- The overt default by the U.S. government on its gold bonds in 1933. The United States had in clear and entirely unambiguous terms promised the bondholders to redeem these bonds in gold coin. Then it refused to do so, offering depreciated paper currency instead. The case went ultimately to the Supreme Court, which on a 5-4 vote, upheld the sovereign power of the government to default if it chose to. “As much as I deplore this refusal to fulfill the solemn promise of bonds of the United States,” wrote Justice Harlan Stone, a member of the majority, “the government, through exercise of its sovereign power…has rendered itself immune from liability,” demonstrating the classic risk of lending to a sovereign. In “American Default,” his highly interesting political history of this event, Sebastian Edwards concludes that it was an “excusable default,” but clearly a default.
- Then the U.S. government defaulted in 1968 by refusing to honor its explicit promise to redeem its silver certificate paper dollars for silver dollars. The silver certificates stated and still state on their face in language no one could misunderstand, “This certifies that there has been deposited in the Treasury of the United States of America one silver dollar, payable to the bearer on demand.” It would be hard to have a clearer promise than that. But when an embarrassingly large number of bearers of these certificates demanded the promised silver dollars, the U.S. government simply decided not to pay. For those who believed the certification which was and is printed on the face of the silver certificates: Tough luck.
- The fourth default was the 1971 breaking of the U.S. government’s commitment to redeem dollars held by foreign governments for gold under the Bretton Woods Agreement. Since that commitment was the lynchpin of the entire Bretton Woods system, reneging on it was the end of the system. President Nixon announced this act as temporary: “I have directed [Treasury] Secretary Connally to suspend temporarily the convertibility of the dollar into gold.” The suspension of course became permanent, allowing the unlimited printing of dollars by the Federal Reserve today. Connally notoriously told his upset international counterparts, “The dollar is our currency but it’s your problem.”
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It’s more about repudiation and debt rather than default, and there will be the sausage-making with the usual suspects.
💭 Our thought bubble: What might be truthier for government figures to say is not that the U.S. has never defaulted on its debts — but rather, it has never repudiated its debts.
- Such a dramatic turning of the nation's back on previously incurred debts has never, to our knowledge, happened with Treasury debt.
- On the other hand: There have been episodes when the U.S. said it would not pay debts that it was arguably responsible for — for instance, the money Cuba owed Spain after the U.S. took control of the island in 1898.
- Also, in the 1840s, the U.S. refused to pay the debts of indebted states, which some foreign creditors thought should have been backed by the Federal government.
The other side: Congressional Republicans argue the U.S. public debt is so large — at roughly 100% of GDP, the biggest since World War II — that threatening extreme measures, such as not raising the debt ceiling and defaulting in order to extract spending cuts from the White House is a legitimate tactic.
The bottom line: This may all be beside the point — at the rate we're going, claims about America's ironclad commitment to servicing its debts appear pretty hollow.
If Republicans in Congress continue to openly threaten to default, then the comforting — though false — image of the U.S. as the world's best borrower will be relegated to the history books anyway.
www.axios.com/...
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While it’s good to be one of the financial hegemons, there might be residual opportunism and exploitation constructed upon disasters.
What crypto has instead revealed itself to be is a naked instrument of financial speculation and fraud, and a highly lucrative one. Far from removing politics from money and decentralizing power at the expense of oligarchic influence, crypto has become a vector of power and influence, not just for financial market participants — from professional traders and portfolio managers to the legions of insufferable crypto bros who flaunt their gains on the streets of Miami and Los Angeles — but for powerful actors in the tech industry wishing to gain a purchase on political decision-making. As a result, it has become an important arena of elite contestation. The current electoral campaign in the United States is a perfect showcase of this evolution.
Both the Democratic and Republican candidates are intimately connected to the California-based tech industry. But the incumbent Democrats have (too little, too late, perhaps) taken the first steps in introducing regulatory measures akin to those that exist in the financial industry. While the Securities and Exchange Commission (SEC), currently staffed by Joe Biden pick Gary Gensler, has over the last decade proven notoriously toothless in its job of curtailing the (often fraudulent) excesses of high finance, Gensler’s pugnaciousness and the specter of any infringement of Silicon Valley players’ ability to continue making enormous gains in the poorly regulated crypto world has mobilized many key actors behind Donald Trump, despite the former president’s initial disparaging remarks about Bitcoin. The catalyst for the process seems to have been the downfall of the cryptocurrency exchange and hedge fund FTX (whose former CEO, Sam Bankman-Fried, was recently sentenced to twenty-five years in prison) and the deployment of congressional and regulatory resources (led by Gensler and Elizabeth Warren) that brought it about.
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There is a "Disaster Capitalism Complex", a complex series of networks and influence employed by private companies that allows them to profit from disasters. The threats never fully become enacted as we saw in 2008, and profit will be made.
...economic "shock therapy" favors corporate interests while disadvantaging and disenfranchising citizens when they are too distracted and overwhelmed to respond or resist effectively.
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Joseph Schumpeter coined the seemingly paradoxical term "creative destruction," and generations of economists have adopted it as a shorthand description of the free market's messy way of delivering progress. Since no market is ever ‘free’, its chaos is even messier. Shock as a doctrine.
Project 2025 reads like a Soviet-era how-to manual on the total annihilation of the US government and critics of the regime. And yet media covers the horse race.
Who will win if the default happens. Does contrarianism combine with reactionary ideology to produce profitable opportunities.
Winners
- Distressed Debt Investors: These investors specialize in purchasing bonds at a deep discount after a default, hoping to recover some or all of their investment when the country eventually renegotiates its debt or returns to the market.
- Domestic Businesses: In some cases, a default can lead to economic restructuring and devaluation of the currency, which can benefit domestic businesses by making their exports more competitive.
- Competitor Countries: A country's default can weaken its economy, potentially giving its competitors an advantage in trade and investment.
- Hedge Funds and Short Sellers: These financial institutions can profit from betting against the country's economy or its debt.
Gemini
The original quote is believed to be "Buy when there's blood in the streets, even if the blood is your own.”
The worse off the market is, the better the opportunities are to profit. That's seemingly the credo for contrarian investing. Nathan Rothschild, a 19th-century British financier and member of the Rothschild banking family, is credited with saying that "the time to buy is when there's blood in the streets."
Whether or not Rothschild actually uttered the famous line, it reveals an important truth about betting against market psychology. When prices fall and markets tremble, a bold contrarian investment could reap high profits.
Key Takeaways
- Contrarian investing is a strategy of going against prevailing market trends or sentiment.
- The idea is that markets are subject to herding behavior augmented by fear and greed, making markets periodically over- and under-priced.
- "Be fearful when others are greedy, and greedy when others are fearful," said Warren Buffett, a phrase that encapsulates the contrarian philosophy.
- Historically, market panics can be a great chance for low-priced investments.
- Being a contrarian can be rewarding, but it is often a risky strategy that may take a long period of time to pay off.
Most people only want winners in their portfolios, but as Warren Buffett warned: "You pay a very high price in the stock market for a cheery consensus."1 In other words, if everyone agrees with your investment decision, then it's probably not a good one.
Going Against the Crowd
Contrarians, as the name implies, try to do the opposite of the crowd. They get excited when an otherwise good company has a sharp, undeserved drop in the share price. They swim against the current and assume the market is usually wrong at both its extreme lows and highs. The more prices swing, the more misguided they believe the rest of the market to be.
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