The Government Shutdown Is On—And Bitcoin Is Soaring | What's Moving Your Money

Key Concepts

Government shutdown, appropriations bill, non-essential services, deficit spending, Labor Department, Commerce Department, economic data, job market collapse, ADP data, private sector job loss, consumer spending, recession, neutral assets (gold, Bitcoin), dollar collapse, credibility.

Government Shutdown and its Economic Impact

At midnight, the US government entered a shutdown due to a failure to agree on an appropriations bill. This shutdown involves non-essential services, although the speaker argues that all services related to money are essential to someone. The shutdown is expected to last from a few days to a couple of weeks. Republicans and Democrats are blaming each other, with disagreements over funding for illegal immigration, healthcare, Medicaid, and Obamacare.

The speaker emphasizes the economic impact, noting the government's increasing role in GDP and economic growth through deficit spending under both Biden and Trump administrations. The shutdown will negatively affect the economy due to its dependence on federal government spending.

Impact on Labor and Commerce Departments

The Labor and Commerce Departments will be significantly impacted, with 90% of their staff furloughed. This is problematic because these departments produce critical economic data, including inflation, jobs, income, and small business data. The speaker stresses the human impact on furloughed workers and the loss of public goods that help investors understand the economy.

Collapsing Job Market

The speaker asserts that the job market is "literally collapsing," citing ADP data showing a loss of 50,000 private sector jobs in September, with August's figures revised downward into negative territory. This could mean a loss of 100,000 private sector jobs per month. Factors contributing to this include tariffs, uncertainty, and high interest rates. The Pentagon is also expected to furlough 350,000 civilian employees.

The speaker explains the link between the job market, consumer spending (which makes up two-thirds of the US economy), and recession. A slowdown in the job market leads to reduced spending, which can trigger a recession.

Furloughed Workers and Regional Impact

The speaker cites figures from Russ Vought and JD Vance, estimating that 750,000 workers per day will be furloughed, totaling 1.5 million every two days or almost 6 million per week. While these jobs will eventually return, the shutdown will have a short-term negative impact, particularly in areas like Washington DC, Virginia, and Maryland, where government jobs are concentrated. Local business owners in these areas will feel the pinch.

Market Pricing and Neutral Assets

The speaker notes the rise in the price of gold and Bitcoin, attributing it to their status as neutral assets. These assets perform well when a dominant global power, like the US, loses relative status. The speaker argues that the US is losing power relative to 20 years ago, leading investors to flock to gold and Bitcoin. Bitcoin's appeal lies in its independence from government control and its resistance to inflation.

The speaker suggests that the story of 2025 will be the collapse of the dollar, which makes US stock returns appear better than they are. He uses the example of the S&P 500 in Argentinian peso terms to illustrate how currency collapse can create a false impression of market gains. Bitcoin and gold are attractive because they cannot be debased. The speaker concludes by expressing concern about the loss of credibility.

Synthesis/Conclusion

The government shutdown, coupled with a weakening job market, poses a significant threat to the US economy. The furlough of government workers and the disruption of economic data collection exacerbate existing economic vulnerabilities. The rise of neutral assets like gold and Bitcoin reflects a loss of confidence in the dollar and the US's global standing. The speaker emphasizes the importance of addressing these issues to prevent further economic decline and a potential recession.