Welcome to this week's Market Wrap Podcast, I'm Mike Gleason.
Well, after months of political melodrama, Congress finally did what it was always does in the end – and that is to authorize more deficit spending. On Thursday night, the U.S. Senate approved the deal hashed out by Joe Biden and Kevin McCarthy to raise the debt ceiling through 2024.
Holders of Treasury securities may feel like breathing a sigh of relief knowing that the government won't default. But bondholders continue to subject themselves to interest rate risk and inflation risk.
Now that the U.S. Treasury has essentially unlimited borrowing authority again, there's a very good chance that it will be used to the detriment of the Federal Reserve note dollar's purchasing power.
Sound money observers, along with many others, were not surprised with this outcome of the debt ceiling controversy. Meaningful fiscal restraint is unfeasible without gold in the system.
Since Nixon defaulted on the Bretton Woods Agreement in 1971, there has been no governor on money creation and debt monetization. The Fed will always finance deficits and enable politicians' big government spending.