America's Civil War 2.0

April 3 2023

Weekly Column with The Contrarian

Hello Everyone,

I generally give you an overview of macroeconomic conditions as they occur throughout the week and how the events impact the different sectors of our economy. But today I would like to look to the future by looking into the past.

The Civil War (1861 - 1865 ). It started on April 12th, 1861, at the Battle of Fort Sumter.

For more than 80 years, people in the Northern and Southern States had been debating the issues that ultimately led to war. Issues included Economic, Policies and Practices, Cultural Values, and the extent and reach of the Federal Government. The most important debate was the role of the Department of Justice and the Supreme Court, our legal system. They have the power to pass laws that restrict the freedom of choice of different minorities within our society.

In 1860 the U.S. Government had a debt of $64.8 million. Once the war began, debt grew quickly. The financial cost of the war was significant, totaling an estimated $5.2 Billion. New laws were passed to help finance the war.

Legal Tender Act (1862 ). Allowed the Government to print paper known as " GreenBack “. They also sold $500 million in Bonds to raise money.

The National Bank Act (1863). A nationwide Banking System that loaned money to the Government to pay for the war. A National System of paper money and coins.

By the end of the Civil War in 1865, Government debt had exploded, reaching $2.6 billion. That was more than 40 times what it was only five years earlier at $65 million.

The Civil War was financed by both the Union and Confederates by higher tariffs, proceeds from loans and Bond sales, taxes on income, and issuance of paper money not backed by silver or gold.

One hundred and fifty-eight years later America still has a North/South debate on the same issues as before. And like before there is a Presidential election in 2024 that could culminate into Civil War 2.0. The 1860 Presidential election season saw many heated exchanges between the North and South. President-elect Abraham Lincoln only added to the South's cry for Civil War.

The 2024 Presidential race starts in eight months. America made history last week.

( I only talk about politics as it relates to the dollar, markets, and the economy). This week, former President Donald Trump was indicted by a New York Federal Grand Jury for allegedly paying Stormy Daniels hush money for an alleged affair. With the presidential election next year, Trump is using his legal troubles as a cry for action against the DOJ and the Government in general. MAGA apprentices in the House of Representatives (21 of them), held Kevin McCarthy hostage as the Speaker of the House until he agreed to the Freedom Caucus demands. The 13 no votes allowed the people in the Caucus to gain powerful committee chairmanships. All Republicans are publicly defending Trump and agree that this is all politically motivated by the Democrats. Policies and Practices, Economic, Cultural Values, Extent and Reach of the Federal Government. Remember the issues from the Civil War. The Freedom Caucus in the House this summer can send America back in time by not raising the debt ceiling. Just think? Instant civil chaos and civil war for the U.S. and the world economy as we know it. Our financial system is on the brink, the Fed and Treasury are losing credibility. Both Russia nor China do not want the U.S. Dollar to be the world currency. Will history repeat?

Stay Tuned...

As for the market, 72% of the time the first quarter is in the green (which it was), and April also stays green. Market bulls think rates are topping out and the Feds’ next move is cutting rates as early as July. Second quarter earnings start next week along with economic reports. I am still expecting Inflation to stay above the Fed's target of 2% for longer. Interest rates will stay higher for longer too. Commodity prices have found support and have made moves higher. China continues to lower rates to stimulate growth. Did you notice the date the Civil War started? April 12, 1861. April is a hot time for conflict in the world.