The full faith and credit of the United States suffered another blow in early October as Congress devolved into chaos, with the House of Representatives lacking a leader after the sudden ouster of Kevin McCarthy as Speaker of the House by eight renegade congressmen. It was the first time in American history that a speaker was forced from his position.
Following the ouster, the federal government was, in effect, fiscally frozen—unable to pass spending legislation, or legislation of any kind, and unable to stop the clock from ticking towards a November 17 deadline when a 45-day stopgap spending bill will expire and new spending legislation will be required to avoid a government shutdown. Washington narrowly avoided a government shutdown on September 30 when then Speaker McCarthy agreed to the short-term funding plan over the objection of some members of his own Republican party.
While the federal debt ceiling has been suspended until January of 2025, the crisis in Washington adds to concerns that the possibility of an unprecedented default on U.S. Treasury bonds may loom in the future unless Congress can become a functioning legislative body.Treasury bond prices declined sharply in the aftermath of the chaos, reflecting the fact that increasingly, U.S. Treasury bonds no longer appear to be as much of a safe haven investment as they have been for decades. As a result, gold, a safe haven that has stood the test of time for millennia, will likely appear increasingly attractive to investors who want to protect their assets with the world’s most reliable store of value.
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