It's official! House Speaker Nancy Pelosi is the culprit for the impasse in the fiscal stimulus deal that everybody and their uncle is clamoring for.
Let me first set the stage. The democratic leader is demanding a package of $2.2 trn, which bill the House Democrats passed last month. Moreover, Pelosi has since pressed for its provisions in negotiations with Treasury Secretary Steven Mnuchin. Interestingly, President Trump is offering $1.8 trn, having no problem admiting he has the hots for big, fat packages. On an interview for Fox Business today, Trump said: "We like stimulus, we want stimulus. We think we should have stimulus". What a negotiator. I wonder in which Art of the Deal chapter does it say to show your hand prematurely whilst begging on your knees. The eleventh, perhaps. Cue in the party-poopers, a.k.a. Senate Republicans, led by Mitch McConnell. These stingy, heartless jerks are willing to only go as far as $500 bn. Owing to the fact that Trump is hostage to the performance of the financial markets, particularly the stock market, as a means of duping the electorate into believing the "V-shaped" recovery is really happening, his administration has to roll out more stimuli to keep the illusion alive. Otherwise, if a new package is not forged, and the longer it goes without one, the markets get increasingly restless and, consequently, stocks start to fall, along with other unpleasant outcomes, such as appreciating dollar and lower inflation expectations. In addition, being the crafty anf guileful politician that she is, Pelosi is levering the situation to hers and her entourage's benefit. Or so she thinks! Her goal is very simple. As you know, the Democrats are the Big Spenders' party, buying people's votes in order to win elections. Thus, to pull this off, they promise to waste - or, as they claim, spend and invest - resources in the economy to make up for the private sector's slack , as well as spurring consumption through jobless subsidies and helicopter money schemes of all sorts. On the flip side, the Republicans are taken as being thrifty. Obviously, they are only viewed that way when compared to the Democraps. The truth is that when push comes to shove, prudence goes out the window and, hence, the pampering resumes once again. Therefore, during these negotiations, the Speaker is being tremendously pigheaded by not ceding an inch in trying to compromise with the other side of the aisle. As a result, the stock market tumbles and, more importantly, households get into more dire financial straits. Basically, she thinks the electorate will pin the blame on the Trump administration and, by extention, the Republican party for the relentless economic debacle. Unfortunetely for her, a recent poll by left-leaning YouGov conducted from October 9 to 11, 43% of those polled blamed Pelosi for failing to reach a stimulus deal , while 40% blame President Trump, with the remaining 17% being unsure. For hers and her party's sake, she'd better wise up if she still has hopes of trumping the President and the coming Republican sweep. Moving on to what this means trade-wise. Without surprise, once she caves in and a new stimulus bill is passed, the dollar and volatity are going to drop, while the stock market, specially the small caps, the US Treasury yields, gold and silver will all shoot up. By the looks of it, these markets are already pricing in a new stimulus and relief package.
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AuthorDaniel Gomes Luís Archives
March 2024
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