by Greg Valliere, AGF Management Ltd.
THE THREAT OF A GOVERNMENT SHUTDOWN will dominate the weekend talk shows â but we think it can be avoided just before the Oct. 1 deadline. Neither party wants its fingerprints on a shutdown, so a continuing resolution (CR) is likely, keeping the government open for a few more weeks.
IN ORDER TO GET THIS DEAL, Democrats have to drop their insistence that a debt ceiling hike should be included in this CR. Passing a âcleanâ CR would keep the government open, but a debt ceiling crisis still looms by late October.
THESE TWO ISSUES HAVE OBSCURED the other major conflict â the infrastructure tax and spending packages, which have a chance of passage in the House next week, only to stall in the Senate, where there simply isnât enough support for spending $3.5 trillion or more.
SO THESE ISSUES WILL fester this weekend, into early next week, as Congress kicks the can down the road until an epic battle in late fall that raises the debt ceiling, keeps the government open, passes about $1 trillion in basic infrastructure outlays, and probably approves a greatly-reduced social spending bill.
THIS WONâT BE EASY â it will be complicated, and key players in both parties will have to make compromises. We continue to believe this will look so dysfunctional that the Federal Reserve may have to wait until winter, when thereâs fiscal clarity, to begin tapering its asset purchases.
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THE SEMICONDUCTOR CRISIS WORSENS: Rising Covid infections in Southeast Asia have further slowed production of semiconductor chips, causing more production delays. Auto and electronics companies are suspending production, according to a sobering article in this morningâs Washington Post.
TOP INDUSTRY OFFICIALS WENT TO THE WHITE HOUSE yesterday with this grim prediction: the chip shortage wonât improve until 2023; this will have a major impact on automakers, most of which are cutting production. Eventually there will be federal funding for chip makers, and Intel is about to announce the construction of two huge chip factories in Arizona, costing $20 billion. But this wonât make a difference for another year or two.
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STOP THE PRESSES â BIDEN WON ARIZONA !! After insisting that he won Arizona, Donald Trump faces a repudiation today: the shadowy vote counting firm that was determined to find fraud didnât uncover anything special. Biden won Arizona, just as he won Pennsylvania, Wisconsin, Georgia, etc.
YET TRUMPâS FANATIC BASE will cling to a narrative that the election was stolen; about 70% of all Republicans believe that Biden was not legitimately elected. One problem: thereâs no credible evidence.
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This post was first published at the AGF Perspectives Blog.
