Democrats have the legislative path to push through the $1.9tn American Rescue & Recovery Plan through the back door, if they really wanted to; it’s called budget reconciliation. This is the mechanism that allows Democrats to vote on the plan, which will ease their path and relieve them from having to gain the support of at least ten Republicans, in order to reach the 61 total “YES” votes needed.
Biden presented the plan in a way that aims to unite the country, by hoping that Republican Senators agree to it, but $1.9tn is a huge sum!
Republicans can’t just abandon all logic and agree to this proposed stimulus plan, in the name of uniting the country. The markets, seeing through Biden’s weakness, are not happy with the delays that are projected with this plan.
This anticipated friction between the two camps is the cause of the few red days we’ve been seeing this week, especially in the NASDAQ 100 and, obviously, with precious metals.
BIDEN’S FIRST 100 DAYS
Wall Street’s forecast is that the $1.9tn will be trimmed back all the way to $1.1tn, which is a colossal difference.
The United States’ annual GDP comes out to be around $22tn, so a $1.9tn plan would equal just over 8.5% of it; the impact of it would be enormous.
Just in December 2020, Congress passed the $950bn plan, which took months to get approved and thousands of man hours to get done. Hence, the idea that the government would easily persuade the majority of representatives to sign off on additional $1.9tn – double the size of the last one – is proving to be an issue.
The budget reconciliation process, which is the feasible way to just use the Democrats’ majority, is what Biden’s team would resort to, if the bipartisan angle doesn’t fly. To them, success would show that there is bipartisan support for the plan, so they’re pursuing this path first; that way, they show the country that Republicans have deserted Trump.
In American politics, there is no precedent for parties coming together on legislation like this, just because the president-elect wants to create an image of unity.
Clearly, Democrats are trying to show the world and their own voters that they are more flexible and civil than their more aggressive counterparts, who bulldozed through Washington, but that’s all a façade. If you know politics like a pro, you know that while Trump might have been a straight shooter in showing his disgust with the swamp, the other side is just as vicious, only they choose to conceal that part of their personality from the public.
Most Republicans won’t be fooled by these theatrics.
If the Democrats want to get ten Republican Senators to vote their way, there’ll be heavy political prices to pay.
Don’t forget that there’s an impeachment trial coming up (Which Mitch McConnell is being devious about {more on that this Tuesday}), which will be a focal point for Congress and might take weeks.
The markets are pricing in these time-consuming issues and they’re not excited about them.
BURNING ISSUES: WATCH THESE CLOSELY
- Precious metals must catch a bid this week, or I’m afraid that they’ll consolidate for weeks, perhaps even for 2-3 months, save for a new catalyst that might be introduced that’s not expected at this point.
- On the flipside, there are monstrous efforts on the part of central banks around the globe to artificially curtail the slump in the dollar. Many countries’ central banks are buying dollars and making assurances that they’ll keep on purchasing in 2021, in order to put a floor on its rapid decline – they’re creating artificial demand.
In Israel, for example, where I am currently, the dollar is trading at 1996-levels!
- Re-Opening the economy would mean that many more businesses would compete for your dollars. While closing Main Street compelled consumers to transact with Wall Street names and do their shopping with publicly-traded companies, re-opening would bring back mom-and-pop shops to our lives, weakening corporate profits and markets would price it in.
I like having cash right now and I like keeping my options open, because things could go either way. Therefore, my cash allocation is at 23%, higher than my average 16%.
Lastly, here’s the Total Wealth Report: 12 guiding principles for life – access it HERE!
