The federal budget is arguably the most basic responsibility of the Congress, and has been literally from the start. The Articles of Confederation failed because of huge problems related to taxing and spending, which in turn led to the Constitutional Convention in 1787.
But as I write this, Congress has come to an historic deadlock over the budget, specifically the debt ceiling. Legislators must raise the debt ceiling by August 2 or the federal government's ability to borrow and spend will be in peril.
How much peril depends, of course, on who you ask. The crisis has been building for most of this year; the approaching deadline has made it the top political story for days on end. It's big enough now to spill into the financial news. (It won't matter whether the market goes up, down or sideways, and it won't matter if the politicians decide on compromise or default -- you'll still read stories which fictitiously connect the dots from politics to markets.)
I have no intention of assigning "blame" to either party, though I will observe that both sides are guilty of shameless hypocrisy. In 2006, then-Senator Obama voted against raising the debt ceiling. South Carolina Senator Jim DeMint is a Tea-party favorite, yet his votes include debt-ceiling raises which amount to some $3 trillion.
The screamingly obvious question is, Why Now? Why the high-stakes showdown, when all parties agree that markets and the economy are fragile? Why can't Congress act on its most basic responsibility?
Plenty of answers seem to make sense, I'm sure you've read a few. Yet I'd like to introduce you to an answer that you will not read elsewhere. It has to do with social mood, and how this debt ceiling crisis is a near-perfect reflection of the current trend in that mood.
Consider this excerpt from Bob Prechter's 1999 book, The Wave Principle of Human Social Behavior:
"What does it really mean to say that the social mood trend is trending 'up' or 'down' at a particular degree? Specifically, what characteristics and emotions do waves reflect? What actual human feelings compose social mood? There appears to be a social polarity that underlies all social interaction. We can refer to these opposites as 'positive' and 'negative,' not simply to represent polarity but also to imply a value judgment with respect to the net social experience (though not to every aspect of it).... The list below summarizes these polarities.
"Positive mood/Negative mood
tendency to praise/tendency to criticize
The Positive/Negative list I excerpt here speaks for itself -- on the negative side, that is, as they all describe the mood that's at work in the budget crisis.
That crisis is an expression of social mood unfolding before our eyes. Understand that mood, and the question regarding "Why Now?" answers itself.
Prechter's current Elliott Wave Theorist goes much deeper into where social mood is now, and where it's heading in the near future. Learn more about the issue below.
* * * * * * * * * * * *
Inside Bob Prechter's July 2011 Elliott Wave Theorist ...
The Demise of
"Printing Money at Will"?
The ability of central banks to "print money at will" explains why many investors have a deeply held fear of inflation.
It's true that central bankers sometimes drop not-so-subtle hints to reinforce this perception -- such as Ben Bernanke's 2002 "fighting deflation" speech, when he said that if necessary, the Fed would get the public to spend with a "helicopter drop" of money.
Well, that symbolic "helicopter drop" has been in flight since 2007. But now the so-called "drop" is over. The printing presses have gone silent. It's time to look at what's happening right now -- and what will follow soon.
Real events point to real financial trends. In the just-published Elliott Wave Theorist, Bob Prechter has chronicled an astonishing rush of recent events which point to a "gathering storm"... KEEP READING>>
* * * * * * * * * * * *