Weekly column: The debt ceiling dilemma

Review and preview

Treasury Secretary Janet Yellen told Congress Friday that the U.S. government is now expected to run out of cash to pay its current obligations by June 5, updating her previous estimate that said the day could come as early as June 1. – Elizabeth Elkind, “Yellen Estimates Government Will Run Out of Cash by June 5 Without Debt Ceiling Agreement,” www.foxbusiness.com, May 26, 2023.

Like many economists and market participants, my working assumption has been–and remains–that Washington, DC, will resolve the #DebtCeiling saga. But this is not to say that there are no adverse longer-term spillovers, including: further erosion of trust domestically in the policymaking process, the diversion of political attention and interest away from urgent sustainable growth and productivity issues; and unfavorable messaging to the rest of the world about US economic management. – Mohammed A. El-Erian, CEO, Pimco, Twitter feed, May 26, 2023.

And the beat goes on, the beat goes on

Drums keep pounding a rhythm to the brain

La de da de de, la de da de da

­Sonny and Cher, written by Sonny Bono, “The Beat Goes On,” recorded 1967.

It was a wild week for the nation and for the world, but if you were looking for logic, common sense, or a pattern in financial markets, chances are … you were bewildered. And that’s just the way Gemini likes it as we have entered the season of the witch, er, twins.

In the U.S., for example, the DJIA broke to a new 8-week low late last week (before Friday’s rally), whereas the NASDAQ soared to its highest level in over a year. The S&P is not far behind its high for this year. Two markets up, one market down.

Getting everyone on the same page was quite a challenge last week, whether you were a politician or a financial market. One party says we’re making progress in the debt ceiling talk, while other members of the same party say we’re far apart, so… let’s take a break for the holiday and reconvene next week while Rome burns. And the beat goes on while the media keeps pounding the same rhythm into our brains. La de da de de, la de da de da. The week was a perfect reflection of the dualistic nature astrologers attribute to Gemini.

The pull in opposite directions was also present in the equity markets of Europe and Asia. The Netherlands AEX had a nice rally and is again near its highs for the year. But the FTSE and SMI were down to multi-week lows late in the week. The German DAX made a new all-time the prior week, but spent most of last week in a downtrend. The Japanese Nikkei made a new 33-year high last week, while India’s NIFTY index soared to its highest mark since December 15. But the Hang Seng of Hong Kong and Shanghai Composite of China plunged to new multi-month lows. Australia’s ASX index posted a new 8-week low.

Some Fed governors started expressing a bias towards raising interest rates in June which resulted in a  spike up in the U.S. Dollar and a sharp decline in Gold and especially Silver. A similar pattern was noted with Bitcoin. But if I am reading the stars right, there won’t be another interest rate hike with Jupiter now in Taurus for the next year. Taurus likes things stable. Of course, Uranus is there too, and Uranus is anything but stable – another conundrum, just like the basic nature of Gemini. Gemini is a sign of intelligence. But intelligence doesn’t bestow stability on the genius.

Short-term geocosmics and longer-term thoughts

Mr. DeSantis shares Mr. Trump’s lack of humility but not his lack of discipline and understanding of government. Mr. DeSantis is the thinking Republican’s populist. He argues that the left has taken control of America’s core narratives through undemocratic means, by seizing cultural and corporate institutions, and is telling stories that warp young minds and curtail freedom. America’s institutions are not just corrupt; they are insidiously corrupting. – Lexington, “DeSantis is a Truer Believer, If a Lesser Politician, than Trump,” The Economist, May 24, 2023.

The House Freedom Caucus on Thursday threw a wrench in Speaker Kevin McCarthy’s plans to finalize a debt limit deal with President Biden, demanding new provisions in exchange for their votes. Thirty-five members of the hardline group sent a letter to Mr. McCarthy outlining a new conservative wish list. The lawmakers wrote that GOP unity behind Mr. McCarthy would be endangered if the demands were unmet. – Haris Alic, “35 Freedom Caucus Members Demand McCarthy Expand Debt Limit Negotiations with Biden,” The Washington Times, May 25, 2023.

It’s hard to tell which party and which leaders are undermining America’s core foundations the most. But with transiting Pluto still in the orb of the nation’s Moon conjunct Pluto in the founding chart of July 2, 1776, and with the observation that Pluto’s major events happen about 1-2 years after the aspect separates, the danger of the divisiveness wrought by uncompromising extremists and hardliners of both parties threatens both the union and the unity of the population.

Pluto, more than all other planets, exhibits an incubation period prior to manifestation. More often than not, events happen as other planets apply toward their aspects. With the transit of Pluto, the events related to the planets involved tend to occur after the aspect separates. That is, the causes underlying the need for transformation and reform are sown during the aspect. But the results of those behaviors (that can be destructive) usually don’t become obvious until later, when it is too late and the symptoms too far entrenched to do anything about it except to resign oneself to the reality and just start over along a new path.

There is still time and support from the cosmos to make the necessary agreement before the current debt crisis explodes due to the uncompromising nature of a few extremists who could derail the process and lead the nation into default or downgrade of its credit worthiness. This is noted in the approaching sextile between Jupiter and Saturn on June 19. As an applying aspect, an agreement is possible sooner than later. However, with Pluto still in its incubation period to the nation’s natal Moon/Pluto conjunction in late Capricorn, there are yet other deep social, political, and economic conflicts to resolve before the United States of America actually becomes “United” again. And like all conflicts, those cannot be resolved without a willingness to compromise, finding common ground and the middle path (a move away from extremism and more to the center), which is the path of success possible with Jupiter in a waxing sextile Saturn. In fact, it is the solution implied by the entire 10-year waxing phase of Jupiter to Saturn that began December 21, 2020, but has been struggling under the weight of the disruptive Saturn square Uranus (2021-2022) and now Jupiter square Pluto (May 18, 2023, +/- 4 months).

Market-wise, we have now entered the season of Gemini (May 21-June 21). This is when markets are frequently given to sharp whipsaw behavior, with sudden, brief, and yet very sharp price reversals (especially in Silver). Keep in mind that Gemini is ruled by Mercury, so the sign itself has many characteristics of the Trickster – especially when the Moon is also in an air sign (May 29-31, June 7-9, and June 16).

Next week will find Sun square Saturn on May 28, which is over this weekend and implies more resistance to a final compromise. Maybe it’s a good thing they went home for the holiday. This will be followed by Venus trine Neptune on Friday, June 2, which offers hope for an agreement. But if that fails, we next head for the Venus/Pluto opposition on Monday, June 5. Both of those planets are associated with debt and credit, and Venus is the planet of compromise. However, the opposition is a hard aspect, so this could be more than a little problematic for markets if there is not an agreement by then.

Yet underlying all this political and economic drama, the tech revolution led by artificial intelligence continues to support our long-standing view of an emerging renaissance. Now, if we could just get some real intelligence and authentic care for this country’s (and the world’s) future exhibited by our elected leaders and a willingness to work together for the well-being of “the people (Aquarius),” what a marvelous renaissance this nation and the world could experience! It’s a choice between an incredible new world and an exciting future, or a world led by extremists at war with one for power with one another (disguised as ideology) threatening to derail the natural course of human growth and evolution.

Pluto in Aquarius will have something to say about this before it’s all said and done. In classic Plutonian fashion, the “end times” are also the “beginning times.”