by Brian Shilhavy
Editor, Health Impact News

Today, October 3, 2023, is a historical day in the United States, as chaos now reigns in America’s political and financial sectors.

In the U.S. Congress, Speaker of the House of Representatives Kevin McCarthy was removed from his position by a vote of his fellow members of the House of Representatives, something that has never happened in the history of the United States until today.

Shortly before McCarthy lost his position as Speaker of the House of Representatives, the U.S. Stock Market closed with the Dow Jones Industrial Average losing over 400 points, its highest loss since the banking collapses back in March, giving up all of its gains on the year.

The huge loss in the Stock Market today is being blamed on rising Treasury yields.

Major U.S. stock indexes closed sharply lower on Tuesday as a surge in Treasury yields continued, pushing long-term benchmark rates to their highest level since the fall of 2007.

The Dow Jones Industrial Average shed about 430 points, or 1.3%, ending near 33,003, according to preliminary FactSet data. That marked the blue-chip index’s biggest daily drop since the March banking crisis, according to Dow Jones Market Data. It also erased the Dow’s yearly gain, with the index now down 0.4% in 2023.

Other equity gauges also skid Tuesday, with the S&P 500 index ending down 1.4% and the Nasdaq Composite Index closing 1.9% lower. Stocks have been under pressures from the continued climb in longer 10-year and 30-year Treasury yields since the Federal Reserve signaled rates could stay high through 2024 and beyond at its September meeting. (Source.)

Pam Martens of Wall Street on Parade issued a dire warning in her newsletter today:

The Fed’s problem and the U.S. Treasury’s problem just became the problem of every American who has their retirement savings stuffed in the stock market via 401(k) plans or direct holdings.

[S]tocks do not like yields on the 10-year U.S. Treasury note rising to a level that is competitive with the return on stocks – especially since the principal on the Treasury note is guaranteed at maturity while the principal in the stock market is guaranteed to take one’s stomach on a roller coaster ride.

Last evening, the 10-year U.S. Treasury note had spiked to a yield of 4.682 percent, its highest yield since 2007. As of early this morning, its yield had spiked even higher, to 4.738 percent, making a 5 percent handle increasingly possible.

In response to the competition from Treasury securities and chaos in running the U.S. government, stocks have sold off in 8 of the last 10 trading sessions through Monday.

On September 21, the U.S. Treasury’s Assistant Secretary for Financial Markets, Josh Frost, delivered a speech in which he indicated that “we expect that further gradual increases in coupon auctions sizes will likely be necessary in future quarters.”

Frost also indicated that the Treasury is, apparently, going to join the thinking of the wizards at the Wall Street mega banks who prop up their banks’ share prices by spending tens of billions of dollars a year buying back their own stock.

The Fed, as you might recall, called its Treasury buyback program Quantitative Easing or QE for short. The Fed is now attempting to whittle itself out of the $9 trillion mess to its balance sheet that resulted from that radical experiment by shrinking its balance sheet. So far, it’s whittled away about $1 trillion.

Which means that a new buyer of last resort for Treasury securities is needed. But should that really be the same entity that is issuing the debt in the first place? If the Treasury has the money to buy back its debt, why is it issuing the debt? (Full article.)

One analyst wrote that one major source of rising U.S. bond yields is China, who has sold $300 billion worth of US Treasurys since 2021, including $40 billion since April 2023.*

As to who is going to replace McCarthy as Speaker of the House of Representatives, who is second in line to take over as President of the United States, after the Vice President, is anybody’s guess at this point.

As rumors spread over the weekend that McCarthy could lose his position as Speaker of the House, no names had surfaced yet as to who his replacement could be as of today. It took 15 rounds of voting back in January to install McCarthy as Speaker of the House, and Donald Trump’s name started showing up in the latter ballots cast. Could we see a stronger effort this time to bring back Trump?

But it would also not be surprising to see some of the older Republicans reach out across the aisle to Democrats, which could even result in a Democrat taking over as the House Speaker, such are the crazy times we now live in.

Whatever happens, we are much closer today to a total economic and societal collapse here in the United States, than we were yesterday. More banks collapsing seems like a certainty at this point.

[…]

Via https://healthimpactnews.com/2023/economic-and-political-chaos-descends-upon-the-united-states/

*Both China and Japan (now the largest holder of US treasury bonds) are selling off. Japan’s holdings of $1.1 trillion represent 4.4% of the total, while China’s $835 billion is equal to 3.4%, according to the most recent Treasury data from the end of June. See https://asia.nikkei.com/Business/Markets/Bonds/Japan-China-pare-U.S.-Treasury-holdings-as-currencies-hit-new-lows#:~:text=Japan’s%20holdings%20of%20%241.1%20trillion,from%20the%20end%20of%20June.