Welcome to “Crisis Theater Season” 2023

January 20, 2023

Theater season opened this week with two blockbuster shows kicking off the program.

If there’s one thing the high and mighty love, it’s a good show. Unfortunately not all political theater ends with the same happy (or at least tidy) endings as most Broadway productions do. 

The two shows opening the 2023 season reveal a lot and could have some serious consequences.  Here’s what’s playing…

Live from Davos, Switzerland

This past week thousands of the world’s uber-elite landed their private jets in Davos, Switzerland to take part in the annual World Economic Forum.  

If you’re not familiar, the WEF is a giant party of egos — (a party of giant egos?) — where the super-rich and super-powerful put their heads together using their superior intelligence to solve all the problems plaguing the world. 

Once upon a time, the globalist confab — a secret society of the elite bent on taking over the world — was thought to be a conspiracy theory. Now they wear their arrogance and their ambitions proudly on their sleeves.  

Anyway, the meetings and minglings got started this week. In case you missed it, here were just a couple highlights (all emphases are mine).

Team leader Klaus “The Great Reset Man” Schwab kicked the show off…

“We couldn’t meet at a more challenging time. We are confronted by so many crises simultaneously. What does it need to master the future? … Only if we are involved with all our passion to construct and to shape the future, I’m convinced we will overcome the present multi-crisis.”

It takes a lot of chutzpah for an individual to get up on stage and talk about “mastering the future.” And not in a Tony Robbins “master-your-own-future” way. He’s talking about mastering everybody’s future. (Actually, maybe it’s not quite so audacious when you’re on stage speaking into an echo chamber.)

Al Gore, the godfather and one of the chief benefactors of this draft of the global warming climate change script gave a presentation described as both “impassioned” and “unhinged,” in which he claimed…

…the current output of greenhouse gasses is sending heat into the atmosphere that is equivalent to “600,000 Hiroshima” bombs every day.

And he warned that those greenhouse gasses are…

boiling the oceans, creating these atmospheric rivers, and the rain bombs, and sucking the moisture out of the land, and creating the droughts, and melting the ice and raising the sea level, and causing these waves of climate refugees.’

Unhinged? Impassioned? You be the judge. 

A Panel Discussion That Stole the Show

Possibly the most egregious display of arrogance was the US’s own Climate Czar John Kerry who got up and thanked his introducer for getting him the best room he’s had at Davos in 35 years. (I’m not kidding!) 

As soon as he opened his mouth, the pompousness started dripping off the walls…

“When you start to think about it, it’s pretty extraordinary that we — a select group of human beings, because of whatever touched us at some point in our lives — are able to sit in a room and come together and actually talk about saving the planet. I mean, it’s so almost extraterrestrial to think about ‘saving the planet.’”

Then he talked about the big problem; that there were still “allegedly wise adult human beings” who were ignoring all the science on the issue. (BTW, I wrote about the “science” last June.) And he spoke about how they needed to bring everyone to the table now to recommit to a 1.5 degree temperature target to stop the impending catastrophe. 

“The state of the union is coming up. The president’s got to, and you know I think will, because he believes this, we gotta move this. Because that’s the only way we can keep 1.5 degrees alive.”

“So how do we get there? Well the lesson I’ve learned in last the years, and I’ve learned it as secretary and learned it since reinforced in spades, is money, money, money, money, money, money, money.

Isn’t that the answer to every problem according to political types? Of course Kerry offered a veiled solution to the problem of a lack of money, money, money, etc…

“We have to find a way to get really serious about bringing the corporate world on board around the world.”

We have to unleash the trillions of dollars for bankable deals. How do you create the bankable deals? You have to leverage. You have to bring people together. To take first loss to minimize the risk. The minute you do that you can get a deal like we got with Indonesia (note: which was funded on the back of a $500 million loan from Germany), with Mexico, with VietNam.

Leverage. Bring people together. Take first loss. 

Interesting sounding solution. Except it wasn’t the small crowd sitting in front of him that he was talking about. If every member of the WEF were willing to personally pony up the next $10 trillion, I might be OK with them going on like this. But that wasn’t what he was talking about at all. 

He meant for the attendees to leverage their wealth. To go out and mingle with the politicians at the event and promise them X millions for their next campaign if they get XYZ legislation passed to dole out subsidies and tax credits that transfer risk from businesses to the taxpayers of the countries they’re operating in. Because that’s how the political process works everywhere (and it’s why the WEF is truly a job fair for future ex-politicians.)

Nevermind that those “first losses” have ranged from a simple a waste of taxpayer money — like the Solyndra executives who were paid huge bonus checks even after the company failed — to potential economically and socially devastating events — like the energy crisis Europe just dodged thanks to an unusually warm winter.

All this “central committee planning” impacts markets. It impacts investors. It impacts your future. 

Maybe a greater irony than all the private jets in attendance was the fact that China Energy Investment — a company from a country whose carbon footprint is now bigger than all developed countries combined — is a sponsor of the event. 

Now I didn’t mean for this to turn into a rant on the green energy cult of Davos. There’s plenty of good theater about to open right here in the US.

For Example…

While Czar Kerry was going on about money, money, money… etc. President Biden was busy bragging about his own contribution to the cause — the Inflation Reduction Act.

The legislation was little more than a pared down version of the president’s $3.5 trillion Build Back Better plan which included $369 billion in tax credits and subsidies for green energy initiatives. (Gotta start somewhere.) 

Incidentally even this plan was DOA until Joe Manchin secured an agreement to permit the completion of the Mountain Valley Pipeline, and Kyrsten Sinema got to keep the carried-interest loophole that allows investment managers to shield the majority of their income from higher taxes.

But I digress…

While they were negotiating all that to save the planet, they weren’t passing a budget for the new fiscal year. Instead, in a last minute rush, they passed a massive $1.7 trillion omnibus bill to fund the entire government (among other pet projects) this year. 

Which Brings Us to Washington’s Theatrics

The immediate problem is that federal borrowing to pay for the omnibus bill technically will hit the debt ceiling Jan. 19, according to Secretary of the Treasury Janet Yellen.

And so it did.

Just yesterday Secretary Yellen wrote to Congress informing them that, as we had reached our borrowing limit, no further debt would be issued between now and June 9 and that it would begin using “extraordinary measures” to pay the country’s bills.

Good thing it’s not a big deal.  A little history on the debt ceiling from SchiffGold:

Congress imposed the first debt ceiling in 1917. The Second Liberty Bond Act capped debt at $11.5 billion. This was supposed to put some kind of restraint on government borrowing. Of course, it didn’t. Every time the debt approaches the ceiling, Congress simply raises it. Between 1962 and 2011, lawmakers jacked up the debt “limit” 74 times, according to the Congressional Research Service.

In 2013, Congress came up with a new trick. Instead of raising the debt ceiling, it just suspended it. In 2014, Congress set the debt limit with a built-in “auto-adjust.” The auto-adjust ended in March 2015 with the debt ceiling set at $18.1 trillion. After that, Congress simply suspended the debt ceiling three times.

Ever-willing to stretch the debt as they see fit, the debt ceiling is really of little consequence as far as Congress is concerned.

Let the Drama Begin: Act 1

Of course that doesn’t mean there won’t be drama. 

The Republicans are insisting that Dems agree to significant spending cuts in order for them to go along with a higher borrowing limit. The Democrats are saying “shut up and just raise the limit.”

It’ll be a back and forth as they take the battle as close to the wire as they possibly can. Ultimately they’ll agree to some higher number. I have no doubt about that. 

US debt underlies a good piece of the global financial system. The 10-year Treasury note is considered a benchmark — the risk free rate of return — against which nearly all financial assets are priced. 

Any failure to pay our bills (including our debt) would likely cause chaos in the financial markets. It would cause a sell-off in the Treasury markets substantially increasing the country’s cost of borrowing. (It’s gotten bad enough with the Fed hikes alone.)  A failed auction would be devastating. It could lead to missed payments on Social Security and veterans benefits.

It would damage (if not destroy) the fake economy they’ve invested in building and maintaining for decades. 

Even legislators aren’t that dumb.

No, the debt ceiling will get raised in time. 

But just playing out the theatrics while getting there can create its own consequences.

In 2011, credit rating agency Standard andPoor’s became concerned with the country’s free spending. They demanded $4 trillion in spending reductions. Congress went on with their show back then and, at the last minute, agreed to cuts around $2.4 trillion.

S&P downgraded the country’s credit rating.

The Problem With This Kind of Theater

Political theater is always staged around “imminent crises” that must be “averted at all costs.”

I expect the crisis being played out in Davos is far less urgent. 

I’ve said before: I’m not against the development of green energy. There are places for wind, solar and others. We just don’t know what they are yet.

What I do object to is the idea of forcing the development of a product by outside actors, be they the government or private funds, before the market deems it ready.

It replaces the free market with a managed one. And managed economies never achieve the spectacular prosperity and equality goals they promise. Instead all they can offer are unintended consequences.  

The coming debt limit crisis being faced by Washington, however, could have more significant consequences should legislators play things out too long.

These are challenging times. And they’re made even more challenging by the planning and scheming that’s otherwise known as government intervention. 

And that makes it all the more difficult to judge the market as an individual investor. 

We’re watching it all for you… 

Make the trend your friend,

Bob Byrne
Editor, Streetlight Confidential