House in disarray
The U.S. House of Representatives is in disarray. After the shock announcement that John Boehner was stepping down (thrown out by those in the extreme, right wing Tea Party) there was widespread belief that Kevin McCarthy (R-CA) would be the new speaker. McCarthy had a lot of support, but not enough to secure his ascension to the speaker's chair.
Others stepped in, pulling potential support away from McCarthy. There was Daniel Webster (R-FL) and Jason Chaffetz (R-UT).
Today we find out that McCarthy has withdrawn his name for consideration.
The "crazies" are in charge
McCarthy was considered a somewhat moderate, though not as moderate as Boehner. He was definitely more to the right, but nowhere near those presenting themselves for Speaker now. The new candidates represent the crazies of the Republican Party.
Take Utah’s Jason Chaffetz for example. Chaffetz has openly advocated defaulting on the debt. Remember we have the debt ceiling, which has to be raised in early November. If not the government will run out of cash to pay its bills.
Debt ceiling, default and Forex markets
The Forex markets will be sent into a tailspin on such an event. The dollar will come under tremendous selling pressure. Treasuries will likely fall as people move out of them in response to the new risk of ownership and the uncertainty surrounding that.
Furthermore failure to raise the debt ceiling will immediately remove over $500 billion in spending. That is the deficit. The government spends $500 billion more than it collects in taxes so that spending will no longer be in the economy. It will have a major impact.
Dollar to tumble
As economists sharply lower their estimates of growth the dollar will tumble. Forex markets will be thrown into total chaos and dollar selling will become enormous. The dollar will reverse all of its gains that it grabbed over the past six years.
If you are trading Forex markets you need to be very aware of what is coming. It is a major storm and this time I believe that it has a high likelihood of happening because the politics is now really aligning for this to become reality.
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