TLDR: The strangest ritual in US politics, the government debt ceiling negotiation, is back. Sometime by June 1, the US government will have reached the limit (“ceiling”) beyond which it is no longer allowed to borrow and will gradually run out of cash. Unless, of course, the ceiling (for the umpteenth time) is raised. So why even talk about this?
First, let’s review how this whole charade works. The Treasury has to pay the US government’s bills, and to do that it issues debt. Eventually the debt outstanding reaches some arbitrary number called the “debt ceiling.” Unless Congress raises the debt ceiling - remember, it’s arbitrary! - the US defaults on its obligations and market mayhem ensues.
Ok, but it is arbitrary and so should be the easiest cross-party-lines vote ever.
Although Congress has raised this limit over 100 times in our nation’s history, it’s become a time-honored tradition for the opposition party to use available leverage to extract maximum political gain in exchange for NOT burning down America's financial house. Blackmail at its finest.
But surely there are things the most powerful government in the world can do to avoid an embarrassing default?
The Treasury has a bunch of pockets it can reach into - think of wads of cash hidden around the kitchen - to keep the government running for a while. But (chart above) even that is expected to run out in late July.
So we should worry?
In the past, ignoring the drama around it (and assuming Washington would work it out eventually) would have served you well. This is likely the outcome this time, too. Financial markets have become complacent about political risk because ignoring the noise has been the right strategy over the last 12 years. But politics has crossed unthinkable lines in recent years.
If there was a catalyst for incredibly high volatility, this is it.
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We all have it, all the time. But we never think about it. It’s one of those things we take for granted, a part of life - like the US debt ceiling negotiation.
Also called kinesthesia, it is the sense of self-movement, force, and body position. Look at any object on your desk, close your eyes and then grab it. Chances are this was an easy task for you.
That’s because we maintain a 3D model of the world around us and of our body within it at all times in our mind.
Proprioception has been long studied, and it is still little understood. As we repurpose generative AI towards 3D-space navigation, this will become an even more interesting topic.
Read more about it here.