'Financial Armageddon' 🔥
| 🔥 'FINANCIAL ARMAGEDDON'  An understated illustration of what would happen if the US defaulted on its debt.
All right: We need to talk about the debt ceiling, and I promise this isn't as wonky of a subject as it sounds.
THE NEWS On Wednesday, Treasury Secretary Janet Yellen warned lawmakers that the federal government will most likely run out of cash to pay its bills next month if Congress doesn't raise the limit on borrowing. Next. Month.
It's hard to overstate just how catastrophic that scenario would be.
The US has never once defaulted on its debt, and to do so would be an epic unforced error, my colleague Matt Egan explains. Millions of Americans would pay the price as interest rates would spike, the stock market would crater, retirement accounts would take a beating, and the value of the US dollar would erode.
Not to put too fine a point on it: "It would be financial Armageddon," Mark Zandi, chief economist at Moody's Analytics, told CNN. "It's complete craziness to even contemplate the idea of not paying our debt on time."
And yet…
"Complete craziness" is kinda the Republican Party brand right now. Last month, 46 of the 50 GOP senators vowed not to support a measure to increase or suspend the limit. Why? Because sticking it to Biden scores them political points, even if it means playing chicken with America's creditworthiness.
At least 10 Republicans would need to sign on to raise the debt ceiling in a government-funding bill. But most say they won't support it because they oppose Biden's $3.5 trillion economic agenda.
That logic is twisted (and they know that, but whatever…). Raising the debt ceiling does not increase federal spending. All it does is allow the Treasury to cover the expenses that lawmakers in Congress — both Democrats and Republicans — have already authorized. Think payments to Social Security recipients and veterans. And don't forget: The national debt was driven even higher by the massive tax cuts passed during the Trump administration.
THE BOTTOM LINE Playing politics with the debt ceiling is never a good idea, but it is "uniquely childish" to do in the middle of a pandemic and a fragile economic recovery, says Isaac Boltansky, director of policy research at Compass Point Research & Trading.
Just look at what happened in 2011. With an economy still reeling from the 2008 financial crisis, lawmakers got into a protracted debate about the debt ceiling that brought the nation to the brink of default. Even though they ultimately averted disaster, the threat of default sent stocks tumbling and resulted in a downgrade of the United States' credit rating.
I think I speak for everyone when I ask Congress: Can we just, like, not? In case y'all hadn't noticed, we've sort of been going through some stuff this past year. #️⃣ NUMBER OF THE DAY 10.9 million America's tight labor market continues to face a staggering disconnect between the number of jobs available and the number of people out of work. In July, the number of jobs available in the United States climbed to 10.9 million, a new record high. The number of hires stood at just 6.7 million.
⚓ KEY INDICATOR  Steel shipping containers — those humble, ubiquitous boxes you probably don't think about as you fill your cart online — have become incredibly scarce and extremely expensive, my colleague Julia Horowitz writes.
Here's the deal: One year ago, companies would pay roughly $1,900 to rent a 40-foot steel container on a standard route between China and Europe. Today, that costs around $14,000, an increase of more than 600%. Meanwhile, the cost of buying a container outright has effectively doubled.
Why this is happening: It's not that there aren't enough shipping containers in the world, it's that they're all in the wrong places. When the pandemic hit, major shipping lines canceled dozens of sailings. Covid restrictions snarled operations at ports, so some cargo ships simply dropped their goods off and left the containers behind. The "empties" have piled up, and demand for goods roared back to life, overwhelming ports around the globe.
🩸 QUOTE OF THE DAY  She had become … one of the most celebrated CEOs in Silicon Valley and the world, but under the façade of Theranos' success, there were significant problems brewing. — Robert Leach, prosecutor
Lawyers for Elizabeth Holmes and the US government faced off in the long-awaited criminal trial of the founder and former CEO of Theranos. Robert Leach, the lead prosecutor, sought to convince jurors that Holmes intended to mislead investors, patients and doctors about the capabilities of her company and its proprietary blood testing technology. Holmes has pleaded not guilty to multiple fraud charges.
WHAT ELSE IS GOING ON? 📉 US stocks finished in the red Wednesday, with energy and industrials sectors leading the losses.
🛒 Amazon is opening two cashier-less Whole Foods stores, a new test of its (rather creepy) "just walk out" technology that uses cameras and motion sensors to track customers via their smartphones.
✈️ This week was supposed to be the time when many workers returned to the office and business travelers got back to flying. Neither of those things is happening quite the way US airlines had counted on. 🐦 TWEET OF THE DAY   CNN BUSINESS NIGHTCAP You are receiving this newsletter because you're subscribed to CNN Business Nightcap.
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