The U.S. government will run out of money this Friday. Unless Democrats and Republicans find an agreement beforehand, the U.S. government will shut down. This has happened before. But, this time it is occurring at a most inopportune moment. A financial bubble has been growing on Wall Street for a while. It is ready to burst. It only needs a spark. It may be Trump's big mouth.
Until Thursday, Democrats were prepared to compromise with the Republicans to avoid a "shutdown". They were tying their agreement to the maintenance of Obama's Deferred Action for Childhood Arrivals program which allows illegal children to remain in the United States. According to Democrats present at the meeting Thursday, Trump apparently asked why the United States should accept immigrants from "shithole countries such as Haiti, El Salvador or African countries". Republicans rebuffed the accusations. We will probably never know what the President said. But, as noted by Sen. Rand Paul (R-Ky.), both sides may have "destroyed the setting in which anything meaningful can happen". The incident may have killed any chance of a compromise between the two parties in the next couple of days. A shutdown is then a foregone conclusion. How will Wall Street react?
Does Trump know how dependent the United States is on foreign countries to finance its dual deficit? The federal debt amounts to one hundred percent of the American gross domestic product. Japan and China which are the largest buyers of U.S. Treasury bonds have reduced their purchases since December 2013. The United States' saving grace is that both countries do not have much of an alternative to invest their trade surplus. They also know that if the financial bubble bursts, their economies would be badly hit, as would the world economy at large. Caution is the order of the day. But, this is no reason for the President to be rambunctious. A few days ago, he made a rather silly remark about himself. In one of his famous twits, he claimed to be "a very stable genius". This made him the world's laughing stock.
A government shutdown is a bad signal to give financial markets which are volatile by nature. The President's racist slur and his twit unsettle a wobbly situation he should calm down. If the bubble bursts, Trump will have nobody but himself to blame.
