Daily SITREP: Impeachment Falls Flat with McCarthy’s Right Flank (Wed, 13 September 23) – Forward Observer

Daily SITREP: Impeachment Falls Flat with McCarthy’s Right Flank (Wed, 13 September 23)


Good morning. Here’s your Daily SITREP for Wednesday, 13 September 2023.


  • READ TIME: 6 Minutes 
  • Inside the Beltway
    • (1) Impeachment Falls Flat with McCarthy’s Right Flank
    • (2) McCarthy to Unveil Stopgap Funding Plan Today
    • (3) Wall Street Wants Chinese “Witness Protection”
  • Domestic INTSUM
    • (4) Census Bureau: U.S. Incomes Still in Decline
    • (5) U.S. Dollar Rises, Surprising Many Investors
    • (6) Biden Releases Roadmap to Critical Mineral Independence
  • Global SITREP
    • (7) Barclays: No Chinese Financial Crisis Ahead
    • (8) North Korea’s Kim Jong Un Arrives in Russia for Putin Summit
    • (9) 20 Chinese Vessels Enter Taiwanese Waters and Head West
    • (10) U.S. and Philippines to Improve Bases Near Taiwan


  • (1) IMPEACHMENT FALLS FLAT WITH MCCARTHY’S RIGHT FLANK: House Rules Committee and Freedom Caucus member Ralph Norman (R-SC) praised Speaker Kevin McCarthy (R-CA) for formalizing an impeachment inquiry into President Biden but said the impeachment would not change his mind on voting down a Continuing Resolution (CR).
    • Rep. Don Bacon (R-NE) said impeachment needs to be about President Biden and not Hunter, and while he doesn’t support it, he may vote for it if the White House fails to provide documents requested by the House. 
    • Why It Matters: If McCarthy intends to use an impeachment inquiry to get House Freedom Caucus members on board with a CR, he is making a major miscalculation. Freedom Caucus members are signaling that the impeachment will not move them on spending cuts, and McCarthy may have made averting a shutdown more difficult without any political gain. – R.C.
  • (2) MCCARTHY TO UNVEIL STOPGAP FUNDING PLAN TODAY: Rep. Kevin Hern (R-OK) said House Speaker Kevin McCarthy (R-CA) is expected to unveil a short-term plan to fund the government ahead of a possible 01 October shutdown, that will include Ukraine and disaster funding as well as a path to passing all 12 appropriations bills.
    • Rep. Matt Gaetz (R-FL) said if McCarthy puts a Continuing Resolution (CR) on the floor, it will be a “shot and chaser” with a Motion to Vacate following immediately after.
    • Why It Matters: Passing all 12 appropriations bills with only 11 legislative days left before the shutdown deadline is unrealistic. McCarthy will have to develop a CR that will get votes from Freedom Caucus members, but drastic spending cuts are a non-starter with both Democrats and many Republicans in the Senate. – R.C.
  • (3) WALL STREET WANTS CHINESE “WITNESS PROTECTION”: Rep. Mike Gallagher (R-WI) said Wall Street executives asked to have their identities withheld when meeting with lawmakers to avoid alienating Chinese partners.
    • Rep. Raja Krishnamoorthi (D-IL) said members of the House Select Committee on the Chinese Communist Party are realizing that China has taken “aggressive steps to advance its interests at the expense of American” interests, and doing nothing in response is “not an option.”
    • Why It Matters: China has considerable influence in the United States, despite politicians’ wishes and rhetoric. U.S. corporations that conduct business with China have a conflict of interest, and only a decoupling between the two countries – an unlikely development – would prevent this friction. – H.B.


  • (4) CENSUS BUREAU: U.S. INCOMES STILL IN DECLINE: Americans’ median household income fell again in 2022 due to inflation – the third straight year that incomes have declined, according to a U.S. Census Bureau report released yesterday.
    • Median household income, adjusted for inflation, peaked in 2019 and has fallen 4.7% since – to $74,580 in 2022.
    • Why It Matters: To get by, consumers are turning to credit card debt, which recently topped $1 trillion for the first time. Inflation and the economy will be the leading issues in the 2024 elections. – H.B.
  • (5) U.S. DOLLAR RISES, SURPRISING MANY INVESTORS: The U.S. economy has been resilient, and other countries’ economies have underperformed recently, leading to an unexpected rally in the dollar.
    • “Markets have really come back to the theme of U.S. exceptionalism,” said Vassili Serebriakov, foreign exchange and macro strategist at investment bank UBS.
    • The U.S. dollar index – which measures the dollar against a basket of foreign currencies – is up 5% since late July, the highest level since early 2023.
    • Why It Matters: While U.S. dollar strength is a surprise to some investors, it should come as no surprise to long-time SITREP readers. As we’ve been forecasting, Federal Reserve rate hikes will continue to weigh on foreign economies and support the U.S. economy and dollar. More Fed rate hikes will increase this divide between America’s economy and the rest of the world. – H.B.
  • (6) BIDEN RELEASES ROADMAP TO CRITICAL MINERAL INDEPENDENCE: The Department of Interior (DOI) Interagency Working Group on Mining Laws, Regulations, and Permitting released a report yesterday recommending legislative and regulatory changes to build a domestic critical mineral supply chain, including updating the General Mining Law of 1872.
    • National Mining Association President Rich Nolan said the U.S. is “critically outmatched” in the global minerals market, and the DOI’s recommendations “don’t do anything to advance the ball.”
    • Why It Matters: China dominates the critical mineral market for most of the green energy efforts the Biden administration has made, and this new roadmap seems more focused on environmental impact and moving money from the mining industry to environmental programs than building a domestic critical minerals supply chain. One of the key recommendations, a leasing system for mining, is a non-starter for industry, and the royalties the plan calls to impose would likely discourage further mine development. – R.C.


  • (7) BARCLAYS: NO CHINESE FINANCIAL CRISIS AHEAD: China’s property market problems won’t cause a Chinese financial crisis, according to Barclays analysts.
    • Creditors are reluctant to lend to property developers like Country Garden, which affects the high-yield real estate market, but “it just does not rise to the level of a large-scale financial system crisis,” noted Barclays Managing Director Ajay Rajadhyaksha.  
    • Chinese households usually buy homes with down payments of 60-65% of the home’s value, and the average loan-to-value ratio (LTV) is below 40% – far different conditions than the 2007-2008 U.S. housing crisis.
    • Why It Matters: Beijing will take extraordinary measures to prevent a crisis If China’s economic problems worsen. However, variables outside of Beijing’s control – namely, higher U.S. interest rates and a stronger dollar – would raise the chances that a financial crisis hits China. – H.B.
  • (8) NORTH KOREA’S KIM JONG UN ARRIVES IN RUSSIA FOR PUTIN SUMMIT: North Korean leader Kim Jong Un arrived in Russia’s far-eastern city of Khasan via his armored train for a summit with Russian President Vladimir Putin on Monday.
    • The two leaders are expected to discuss North Korean supplies of weapons and ammunition to Russia as well as future joint military operations and exercises.
    • Why It Matters: Kim’s trip is noteworthy in that it follows up on his promise to support Russia in its war in Ukraine and against NATO in Eastern Europe. Kim will likely agree to significantly increase arms and ammunition supplies to Russia in exchange for advanced nuclear and ballistic missile technology and humanitarian aid for the struggling country. Of note are possible discussions on joint military maneuvers, which would be a significant step towards an integrated Eastern Alliance between China, Russia, and North Korea. – M.M.
  • (9) 20 CHINESE VESSELS ENTER TAIWANESE WATERS AND HEAD WEST: Yesterday, Taiwan’s Ministry of National Defense reported 20 People’s Liberation Army Navy (PLAN) vessels and 22 aircraft incursions around the island. This comes after American and Canadian ships transited the Taiwan Strait on Saturday.
    • Chinese media reports that most of the group is headed west to conduct a “far sea exercise” with the Shandong Carrier and would bring that Carrier Strike Group (CSG) to over 12 ships.
    • The additional ships are six destroyers and two frigates, including two Sovremennyy-class destroyers.
    • Chinese defense experts have speculated that the Shandong CSG will head to Guam as a show of force to the United States in recent days.
    • Why It Matters: This show of force around Taiwansignalsl to both the West and the island that China can get a dominating force underway that would make retaking the Asian Pacific extremely difficult. The relatively low air incursion number and pre-deployment messaging show that this message is much more for the West than it is for Taiwan. – J.V.
  • (10) U.S. AND PHILIPPINES TO IMPROVE BASES NEAR TAIWAN: The U.S. and Philippines armed forces are jointly upgrading an airport and naval airbase on the Philippines’ northernmost island next to Taiwan.
    • The airport is dual-use for civilians and military and may receive a fuel storage upgrade. The naval air base is receiving a pier and airstrip upgrade.
    • Filipino Armed Forces Chief Romeo Brawner Jr. said that these upgrades are for “future operations we are going to conduct.”
    • Why It Matters: These announcements come in the middle of China’s latest response to a provocation and will likely fuel further responses. Additionally, this will shorten last-leg logistics and provide close rest and refit spots for ships and aircraft. – J.V.


M.S. indicates analyst commentary from Mike Shelby

M.M. indicates analyst commentary from Max Morton

J.V.  indicates analyst commentary from Jared Vaughn

R.C. indicates analyst commentary from Robert Cook

H.B. indicates analyst commentary from Harrison Burge

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