It’s always healthy to guard against premature optimism, but reality may be making a comeback. Cryptocurrency markets are cratering; Russia has surrendered Kherson; Elon Musk is melting down at Twitter; and President Biden and the Democrats delivered the best midterm performance since President Kennedy. I’ve been watching these trends as a single networked phenomenon, and to see them all moving in unison towards eventual collapse is quietly reassuring.
While the victory of Catherine Cortez Masto in Nevada ensures that Democrats will retain control of the Senate, the results of the Georgia Senate race will determine whether Sens. Sinema or Manchin might continue to play an outsized role there.
The House of Representatives is where we may see continued shenanigans. Kevin McCarthy is very likely to become Speaker, and is likely to reprise his 2011 standoff with Barack Obama over the debt ceiling. Then, his Tea Party caucus (a minority among House Republicans) still managed to bring the country to the brink of default — which only resulted in a lowering of the country’s credit rating, costing us billions.
This time, House Republican extremists are more likely to be in the majority, and are very likely to once again use the debt ceiling to try to extract cuts to Social Security and Medicare. Democrats are unlikely to consider any concessions on these core programs, and are also unlikely to reject any potential cuts to Ukraine aid, another area Republicans may target.
Relative to the larger agenda my team and I have been tracking — Russia’s use of the Ukraine war as a wedge to erode the dollar, NATO, and the EU — the threat or reality of debt default commingled with nuclear threats are the most potent weapons available to Putin and his network of right-libertarians. The perfect storm would consist of a US default (disrupting US government functions as well as increasing the cost of US debt and damaging the dollar) along with the unthinkable, a nuclear demonstration of force by Putin. Combine that with the financial and governmental chaos in the UK, and possible action by China against Taiwan (the US State Department said recently that China has moved up its timeline for the reunification of Taiwan) and you have a recipe for global chaos. And this is the scenario we’ve been hoping against hope will not materialize.
Yet this worst-case doomsday scenario seems increasingly unlikely with each passing day. The House may address the debt ceiling during the lame duck session, either by eliminating it or raising it. Nancy Pelosi is expressing support for this, even as Joe Biden has said he doesn’t support eliminating it. Either way, there is a decent chance Democrats will have the good sense to remove this cudgel from McCarthy’s hands before he can take power.
If McCarthy does try to use the debt ceiling as leverage, he will do so with a razor-thin majority in the House and without any pretense of a public mandate. Wiser voices may prevail over these “End the Fed” dead-enders, and pull McCarthy back from the brink — much as John Boehner and Mitch McConnell did in 2011. If they do go through with a default, there will be a period of weeks or months where Congress can work with the Treasury and the administration to mitigate the potentially catastrophic damage, and public opinion will be broadly mobilized against McCarthy and the radical House Members. Such a gambit could be very costly for Republicans heading into 2024. Had the election delivered a substantial majority to extremist Republicans, a more apocalyptic denouement may have ensued.
FTX, the cryptocurrency exchange run by the ironically-named Sam Bankman-Fried, has gone from a nearly $40 billion concern to zero — essentially overnight. This has in turn led to contagion throughout the sector and contributed to 20+% price drops in Bitcoin and other crypto assets. If crypto was part of a debt-default strategy to challenge the dollar, the jig may be up, as few will consider these risky next-generation assets to be even remotely trustworthy. Institutional investors are likely to be evacuating the sector in coming weeks.
Putin seems to have fully lost control of his war in Ukraine. Aleksandr Dugin, whom many cite as the primary philosophical architect of the conflict, has called for Putin to be executed because of his failure to deliver victory, with the losses of recently-annexed territories like Kherson being particularly embarrassing. While Putin may well resort to using a nuclear, experimental, or “dirty” weapon, any momentum he may have had to advance his global agenda has been lost, perhaps forever. The US elections did not go his way, and the prospects of US default are not what they might have been. Such a deployment is unlikely to deliver any battlefield advantage — even though Gen. Philip Breedlove, former Supreme Allied Commander (Europe) of NATO, recently said Putin was “more likely than not” to deploy a nuclear weapon.
Putin has also been dealt a blow by the loss of his ally Jair Bolsonaro in Brazil. And while Mr. Lula Da Silva is widely believed to be corrupt, to espouse anti-American views, and to be broadly compliant with Putin’s pay-to-play brand of oligarch politics, he at least breaks free of the right-wing strongman model which had been ascendant.
And Elon Musk is doing his best to roil the information environment by seeing just how quickly he can destroy Twitter. I believe he and his co-investors purchased Twitter to help advance the libertarian, anti-Fed, anti-dollar agenda I’ve covered previously. Musk’s takeover seemed well-timed to create chaos right before the election, and then continuing on through the anticipated debt ceiling debacle.
But the “red wave” was a trickle, and Musk’s magic chaos machine seems to be melting down with a whimper. Many of us who are tired of the drama are quietly exploring more verdant pastures; I set up a Mastodon server, a decentralized social media platform similar to but different from Twitter, for purposes of research and reporting. You are welcome to join me there (at toad.social), for community, exploration, and learning.
What if the tide has turned away from the brash duplicitousness of Donald Trump and Ron DeSantis towards a more considered decency, modeled by men like Joe Biden or Fred Rogers? It may be too much to hope for — and far too early. But we’re seeing some early sprouts of such a trend, and it couldn’t emerge a moment too soon. The American body politic remains gravely ill, but it’s reassuring to see democracy still has the will to live, and may make it to 2023 and beyond. Democracy and reality both seem to be staging a comeback — and they have a posse.