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In Case Of Government Shut Down, Close IRS... But Keep POMO Open

Tyler Durden's picture


In order to make the biggest strawman so far in 2011 really scary and nasty, the administration just announced that as part of a government shut down, the IRS would end up being closed. While according to some this is the ulterior motive all along to avoid the premature outflow of tens of billions in cash due to federal tax refunds hitting the IRS next week, which without a debt ceiling hike would push the country into technical default possibly as soon as next week (debt subject to the limit was $14.2 trillion two days ago, just $94 billion under the ceiling and with about $74 billion in debt to be issued next week a $20 billion tax refund withdrawal would push the Treasury over the limit), what is far more amusing is that as the WSJ reminds us, the Fed would still be able to monetize debt regardless if the government was operating or not. Ergo nothing can end POMO ahead of time, not even a complete US government shutdown.

"Since it doesn’t rely on Congressional funds, the U.S. central bank would remain open for business as usual, with normal staffing levels. The Fed would therefore be able to continue with its day-to-day operations, such as buying some $7.0 billion U.S. Treasurys on Monday, April 11. The government bond purchases, due to run until June, are part of the Fed’s latest effort to stimulate the economy."

Well, that and about $400 billion for the next 3 months. So in the absence of new Treasury auctions, the Fed would essentially start canibalizing existing debt in circulation even more as no incremental gross debt will be monetized. Luckily for the Fed, the 35% SOMA holdings top is no longer in existence so should the government not issue one bond in the next 3 months, the Fed will still hit $2.9 trillion in total "assets" by the end of June.

Amusingly the WSJ is concerned that the Fed would not have economic data during the span of a long-term shutdown:

One potential danger for the Fed is that the data it needs to take policy decisions to steer the economy in the right direction may be delayed. That would only be a problem if the shutdown lasts a long time, an unlikely scenario.

Still, during a three-week partial shutdown caused by the budget impasse at the end of 1995 and start of 1996, some key indicators on jobs, prices and spending released by the Labor and Commerce Departments were delayed, creating some headaches at the central bank. Then Vice-Chairman Alan Blinder complained it made it harder for the Fed to set interest rates.

Alas, it appears that the WSJ has not yet gotten the memo that the only "economic" indicator the Fed watches for is the Russell 2000. Everything else is goalseeked smoke and mirrors.


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Wed, 04/06/2011 - 12:51 | 1141504 The Axe
The Axe's picture

Please just shoot me...much

Wed, 04/06/2011 - 13:06 | 1141595 traderjoe
traderjoe's picture

Yes, the Fed can stay open - because it is a private corporation.

Wed, 04/06/2011 - 13:38 | 1141781 malusDiaz
malusDiaz's picture

MFers still have MY F*ING Money!


How can I cancel any and all paycheck -> governemnt, yeah I'll send them a big check at the end of the year, and no more holding my cash hostage.


The Government is broken and holding my cash hostage!

Wed, 04/06/2011 - 14:15 | 1141969 ghostfaceinvestah
ghostfaceinvestah's picture

Exactly, the private central bank does not operate within the confines of government.

As for the IRS, at this point we might as well just shut it down, stop collecting all income taxes, and just print money to pay our bills.  That is effectively what we are doing for 70% of our deficit financing anyway - why not go all the way and cover all expenses that way?

Wed, 04/06/2011 - 21:25 | 1143660 nkktwotwozero
nkktwotwozero's picture

"Would that be stimulative enough?" I hear Paul Krugman asking.


Brought to you by Carl's Junior.

Wed, 04/06/2011 - 13:28 | 1141730 slaughterer
slaughterer's picture

I can now throw out my ES charts from the last government shutdown.  With POMO running, it will be just the same old same old.

Wed, 04/06/2011 - 14:22 | 1141998 covert
covert's picture

the best will close first. I love it when the police department closes :D


Wed, 04/06/2011 - 12:51 | 1141506 konputa
konputa's picture

Cool, can I delay sending my check to the IRS then?

Wed, 04/06/2011 - 12:56 | 1141538 TruthInSunshine
TruthInSunshine's picture


The IRS's 'mail out' offices will be closed.

Their 'mail in' offices will be open via an emergency line of credit compliments of The Bernank.


Thank you.

Wed, 04/06/2011 - 12:57 | 1141546 tmosley
tmosley's picture

Seriously, this is exactly what I was thinking.  I owe a lot of money this year.  The longer I can delay it, the better off I will be.

Wed, 04/06/2011 - 13:19 | 1141686 AZSovreign
AZSovreign's picture

Just file an extension, buy yourself some time until August, maybe we will implode by then and it won't matter.


Sadly my friend you don't "owe" anything in reality you are only forced to capitulate through fear of the sytem. If you release yourself from the fear you will see there are many ways to get out of the "IRS" system.

Wed, 04/06/2011 - 13:27 | 1141725 MarketTruth
MarketTruth's picture

Agree, file an extension and 'kick the can down the road'.

ASK YOURSELF: Why pay your taxes now with dollars now when you can pay later with further devalued dollars?

Wed, 04/06/2011 - 13:41 | 1141801 konputa
konputa's picture

Good points AzSovereign & MarketTruth. Good points.

Wed, 04/06/2011 - 13:48 | 1141845 tmosley
tmosley's picture

There is an economic calculation to be made.  If I file, and don't pay, then the penalty is only 0.5% of what is owed per month, plus 4% interest per year.  From a google search on the subject:

So yeah.  Cheap "loans" from the government, bitches.

Wed, 04/06/2011 - 14:25 | 1141930 Antarctico
Antarctico's picture

I am in your boat, owing this year, is there any difference in the coin you ultimately pay between filing an extension and paying later vs. filing your return by 4/15 but not including your check, assuming either way the check gets mailed by the same date?

Wed, 04/06/2011 - 15:56 | 1142456 cosmictrainwreck
cosmictrainwreck's picture

close to a precise wash, as they will calculate penalties on same time period, no matter. IMO, advantage to extension is it doesn't tip the bastards off quite as soon... totally illogical, I grant, but it makes me feeeeel better HA

Wed, 04/06/2011 - 16:08 | 1142526 Antarctico
Antarctico's picture

Thanks! :)

Wed, 04/06/2011 - 21:23 | 1143655 StychoKiller
StychoKiller's picture

Umm, you STILL have to pay on time when you file an extension.

Wed, 04/06/2011 - 12:53 | 1141512 cossack55
cossack55's picture

Oh, yeah, sure. That would be like Hitler shutting down the Gestapo for Octoberfest.

Wed, 04/06/2011 - 12:52 | 1141514 Archimedes
Archimedes's picture

This is just unreal. I feel like I have said this before but there is no way they can keep this charade up for much longer. 3-6 months before I get my popcorn and watch the fireworks and I am not talking about the 4th of July!

Wed, 04/06/2011 - 12:52 | 1141515 Careless Whisper
Careless Whisper's picture

Shut Down is just the name of the latest dog and pony show brought to you by almost everyone in washington. The defecit is 1,600 billion and they're arguing over cutting 33 billion or 40 billion.  They think ur stupid.

Wed, 04/06/2011 - 12:55 | 1141534 SheepDog-One
SheepDog-One's picture

Yes they think everyone is stupid, but theyre quite wrong as many of us have been calling BS on them all along. Watching them play 3 card monty, they think sooner or later we'll believe it but calling the hole card every time.

Wed, 04/06/2011 - 12:54 | 1141516 sundarb
sundarb's picture

So much for Congressional Oversight. Nothing can stop the Fed continuing to print and smoke the dollar!

MIT Brain research shows that money has the same effect as cocaine on the brain...very

Wed, 04/06/2011 - 13:03 | 1141517 hedgeless_horseman
hedgeless_horseman's picture

If the Ministry of Truth is releasing this today, then there must be a very good chance the .gov will shut down.

No problem.  The legislature in Texas only meets every other year for about five months. 

Wed, 04/06/2011 - 12:55 | 1141521 SheepDog-One
SheepDog-One's picture

How fragile and imaginary it all really is, LOL fest here reading this.

Wed, 04/06/2011 - 16:24 | 1142596 downrodeo
downrodeo's picture

+1 you said it man.

Take that a step further and start thinking about energy and matter. We are the dreamers of the dreams, yo.

Wed, 04/06/2011 - 12:55 | 1141522 slow_roast
slow_roast's picture

This is bullish for psychics as the Fed will have to consult the next line of statisticians after government nincompoops for reference on whether to end QE2 never, or a little later than never.

Wed, 04/06/2011 - 12:58 | 1141539 SheepDog-One
SheepDog-One's picture

Soon the FED's will be hiring wizards and Mage's, if they havent already a while back.

Wed, 04/06/2011 - 21:23 | 1143658 StychoKiller
StychoKiller's picture

They'll fit right in with the Economic Witch Doctors/Fortune Tellers! :>D

Wed, 04/06/2011 - 12:55 | 1141523 Things that go bump
Things that go bump's picture

How convenient that this comes right at tax time.  Even when they open back up I can envision them delaying refunds for quite some time.  

Wed, 04/06/2011 - 12:55 | 1141528 NotAllowed
NotAllowed's picture


Wed, 04/06/2011 - 12:57 | 1141527 unclebigs
unclebigs's picture

I hate to burst your bubble, but the IRS will be collecting $10's of Billions next week not paying it out in refunds.  Those who owe taxes wait until the last minute.  Those with refunds have already filed.





Wed, 04/06/2011 - 12:59 | 1141552 SheepDog-One
SheepDog-One's picture

Collecting 10's of billions from whom? Bankrupt unemployed food stamp ghost middle class americans? HA!

Wed, 04/06/2011 - 13:27 | 1141726 Note to self
Note to self's picture

Yeah really.  I'm payin' big . . . think I'll get an extension and hang out until that comet thing settles itself in the fall.

Wed, 04/06/2011 - 12:55 | 1141529 Sudden Debt
Sudden Debt's picture

HA! Good find TD!

And there are many more tricks in that box.

In my country, the government still needs to pay refunds from 5 years ago but because the government isn't in place they can't because there are some glitches in the calculation of the refunds.

And by 5 years ago I mean: Last years, the year before that one and before that one and before that one and that one.

It's about 6000 euro's per working person.

For govenrment workers that ammount goes up to about 11.000 euros because it also contains unpaid overtime.



Wed, 04/06/2011 - 13:29 | 1141736 Note to self
Note to self's picture

You still fixin' taxis, Latke?

Wed, 04/06/2011 - 12:57 | 1141530 WALLST8MY8BALL
WALLST8MY8BALL's picture

They steer the economy like Rodney drove the car in the movie "The Juror"

Wed, 04/06/2011 - 12:57 | 1141533 tahoebumsmith
tahoebumsmith's picture

California's answer was IOU'S, I wonder how the global reserve currency will hold up with the same approach? Ha Ha, Ha..NOT... Nothing like getting to the counter and having the clerk tell you your card has been declined TIMMAY... Maybe you should go out to your car and start digging through the ash tray for spare change...

Wed, 04/06/2011 - 12:56 | 1141541 Rogerwilco
Rogerwilco's picture

What a difference a decade makes. The world was a sunny beach in April 2001.

Wed, 04/06/2011 - 13:55 | 1141883 sun tzu
sun tzu's picture

The US was heading into a massive recession which started with the bursting of the dotcom bubble in March 2000. 

It was better than it is now, but we were headed into this direction due to Fed policies set into place by Alan Greengas and his cronies.

Wed, 04/06/2011 - 14:08 | 1141926 Josh Randall
Josh Randall's picture

Roger that - I'm living proof of that sunny beach lifestyle in April 2001. But when I look back, to be an unknowingly asleep happy sheep like I was then vs. being awake now, I would take the rude awakening heartache again to be awake, aware, and ready for action like now. Knowledge is Freedom - Freedom is power  

Wed, 04/06/2011 - 15:05 | 1142179 Sokhmate
Sokhmate's picture

The beaches are still getting sun today. They're actually is more enjoyable with the awakening. I see clearerer now.

Wed, 04/06/2011 - 16:15 | 1142558 Josh Randall
Josh Randall's picture

+1000% correct

Wed, 04/06/2011 - 13:02 | 1141545 bob_dabolina
bob_dabolina's picture

I think I figured out what that hole in the roof of that one building is and I don't think anything fell in it. I think something (fuel assembly?) skipped off it.

Look in the water, 5th photo down.

look in the water.

Would also explain radiation levels being 10,000,000 x's higher than normal in the sea water.

Wed, 04/06/2011 - 12:59 | 1141547 gordengeko
gordengeko's picture

Sweet!  Does that now mean I ain't gotta pay in??:)

Wed, 04/06/2011 - 12:57 | 1141548 Raynja
Raynja's picture

But what will POMO buy if there is no new debt. Everyone knows old debt is no good, someone besides PDs might reap the benefits.

Wed, 04/06/2011 - 13:17 | 1141673 EvlTheCat
EvlTheCat's picture

Hasn't stopped the Chinese.

Wed, 04/06/2011 - 13:03 | 1141560 dwdollar
dwdollar's picture

This political maneuver is a "no brainer" really.  Keep extra liquidity in the government and put pressure on the RINOs to make concessions.  The RINOs wouldn't want their credit card maxed out mid-westerners, who dutifully file every year, to feel the pinch or anything.

Wed, 04/06/2011 - 13:06 | 1141581 dogismyth
dogismyth's picture

its their job to keep the corporation going.  That'd be the USA, Inc.  So it looks to me like a smart choice.

Wed, 04/06/2011 - 13:07 | 1141601 Commander Cody
Commander Cody's picture

The Fed is a government agency?

Wed, 04/06/2011 - 13:58 | 1141888 sun tzu
sun tzu's picture

Why do they have a .gov url ?

Wed, 04/06/2011 - 19:12 | 1143248 Hephasteus
Hephasteus's picture

To protrait a false image.

Wed, 04/06/2011 - 13:10 | 1141611 mick_richfield
mick_richfield's picture

Here -- I've corrected some typos in the article's first WSJ quote, above.

Since it has no relationship to the US Government -- except that of a lord to a serf -- the private, for-profit Federal Reverse would remain open for business as usual, and would continue paying ex-legislators to ensure that its privileges remain unchallenged.

"I don't care if the US sinks beneath the frikking waves," said Ben Bernanke, the Federal Reverse Chairsatan.  "We have the Continuity of Trading systems in place.  Even if the Earth is consumed in a nuclear holocaust, the programs will still be down there, buying and selling from each other at high speed, and ramping the Dow by a percent a day or so, while the blackened Earth slowly cools overhead."

"It's beautiful," he smiled.

Wed, 04/06/2011 - 13:21 | 1141688 slaughterer
slaughterer's picture

+ $700b!

Wed, 04/06/2011 - 13:21 | 1141678 bania
bania's picture

i'm sure i'm not the only one here who sees the parallels between the US gov't and Federal Reserve compared to the Fukushima reactor.  They can shut down the systems but those nuclear rods (uranimum-based printing presses) keep spewing heat and radioactive material and continue to poison the world around it.

Looks like we'll need a golden sarcophagus to entomb the Fed.

Wed, 04/06/2011 - 13:35 | 1141764 tomster0126
tomster0126's picture

What a joke...The Fed, Inc....of course the "mail in" box will be still running, no chance of sending in taxes late or even catching a break if this happens.  Let's see what they say after the 18th

Wed, 04/06/2011 - 13:37 | 1141774 99er
Wed, 04/06/2011 - 14:12 | 1141940 gordengeko
gordengeko's picture

Tell me that ain't screaming top heavy.  There are many charts that look exactly like this.

Wed, 04/06/2011 - 14:08 | 1141923 Yen Cross
Yen Cross's picture

LMAO irs can focus on putting some more pressure on Swiss Banks. The US has no credibility any more. Just a bunch of thugs, with rotting warships made in China. It saddens me!

Wed, 04/06/2011 - 14:12 | 1141957 AR15AU
AR15AU's picture

Geithner wants to hold your money hostage... I suggest that everyone take a moment to contact their HR department and fill out a revised W-4, adding at least TWO more personal allowances. Starve the beast.

Wed, 04/06/2011 - 14:22 | 1142000 earnulf
earnulf's picture

Interesting that according to the Treasury, the National Debt has actually declined since the first of April by 27 billion dollars!   This after rising by 134B in Jan, 63B in Feb and 76B in March.   We don't need to cut the budget, Turbo Timmy is cutting the deficit all by himself!   Go Timmy, Go, do the nation's books and fix that ol debt problem!

Wed, 04/06/2011 - 14:26 | 1142009 TexDenim
TexDenim's picture

Screw the IRS. Let them close and never re-open. No one even intended the IRS to become that monster that it is today. Why should most Americans be expected to work until April to support a bloated, overpaid, over-cared-for federal bureacracy? I will never have the health care IRS workers have for free. By what right to government workers, who produce NOTHING, live better than people who work for private enterprise?

Wed, 04/06/2011 - 14:33 | 1142043 SilverRhino
SilverRhino's picture

By what right to government workers, who produce NOTHING, live better than people who work for private enterprise?

There are more of them and they have bigger guns.  No moral authority, just force in the end.



Fri, 04/08/2011 - 15:09 | 1150931 Fiat Money
Fiat Money's picture

You are OVER SIMPLIFYING the problem, you are mixing your metaphors, Tex.  "Big Govt.", in case you didn't notice, WON WWII,  and BUILT the  VERY SOCIALIZED  Interstate highway system, which is the biggest construction project in world history, and made TONS of MILLIONAIRES in very "conservative" (reactionary right-wing!) industries,  like highway contractors, real estate developers, gas & oil refiners, auto makers & dealers, tire companies - the SUBURBS would be IMPOSSIBLE without the SOCIALIZED roads & highway grids making them accessible.

  The problem is, we Americans are SUPPOSED to have "FREE" health care - just as those highways are "FREE" to drive on, you pay your gas (& other) taxes -  but the ELITES have CONNED you into thinking that  anything that serves the public is  "a free ride" for "social welfare queens." 

  Before there were SANITATION CODES (= govt. LAWS) - you could catch a deadly disease living in a tenament slum.   You want to TRASH sanitation & pollution codes?  YOU MIND LIVING NEXT DOOR to a BLOWN UP NUCLEAR REACTOR?    Don't throw out the baby with the bath-water.  The 1950s saw THE HIGHEST RATE of UNION jobs in history,  which was SYNONYMOUS with the GREAT MIDDLE CLASS that made so many Americans like you feel so empowered. 

  UNION SCALE WAGES & BENEFITS BUILT America, and now,  under 6 decades of elite MANIPULATION, you believe that union benefits for paycheck people, are as evil as BAILOUTS for FAILED, FRAUDULENT, CONGRESS BRIBING banksters.


Wed, 04/06/2011 - 14:49 | 1142105 jkruffin
jkruffin's picture

As Tyler already mentioned, BTFD,  the 11th hour save will happen, it has been planned already. Benny needs the S&P at 1500 in June before the collapse happens so it will stay above 1000 when he starts draining the liquidity. This is Bubble man's thinking.

Anyone who doesn't believe this is not paying attention.

Wed, 04/06/2011 - 14:55 | 1142136 Sokhmate
Sokhmate's picture

I'm all for shutdown if that means i don't have to use quickbooks anymore.

Wed, 04/06/2011 - 15:43 | 1142400 belsebub
belsebub's picture

So, what does this mean for govt yields going into next week? Any ideas?

Wed, 04/06/2011 - 18:02 | 1142945 PulauHantu29
PulauHantu29's picture

"From your mouth to God's ears."

Did Mr O ever hire those additional 16,000 agents Pelosi talked about?

Wed, 04/06/2011 - 18:10 | 1142985 Hephasteus
Hephasteus's picture

"While according to some this is the ulterior motive all along to avoid the premature outflow of tens of billions in cash due to federal tax refunds hitting the IRS next week, which without a debt ceiling hike would push the country into technical default possibly as soon as next week (debt subject to the limit was $14.2 trillion two days ago, just $94 billion under the ceiling and with about $74 billion in debt to be issued next week a $20 billion tax refund withdrawal would push the Treasury over the limit),"

Bingo. April 15th something ugly is going to happen, one way or another. You can claw back past earnings for either 3 or 5 years. I can't remember and my guess is this year is going to be one hell of a claw back.

Wed, 04/06/2011 - 19:06 | 1143221 jmc8888
jmc8888's picture

Of course.  That's how many want it.  Drown gov't in the bathtub, make it seem evil, or incompetent (not hard these days...or decades), convince people this is the only way gov't can be run (wrong...although it's hard to see that right now), and keep the printers rolling along for the banksters. 

Banksters don't need gov't, they have the printing presses to keep them going.  All of course, at our expense.

Wed, 04/06/2011 - 19:13 | 1143252 Buck Johnson
Buck Johnson's picture

I never thought about that reason for closing the govt. because of the tax checks, makes sense.  Also I think it will be closed because essentially the govt. is out of money and they know that raising that debt ceiling is a political landmine to get through both the congress and the senate.  So I see at least a week of shutdown, but I bet it may be 30 days (a contractor talked to a CNBC anchor on the congressional train that he was getting his company set for 30 days, I think he may know something or not).

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