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Whither Debt Limits?
By now Zero Hedge readers should be aware of the distinction between the national debt and the national debt that is subject to statutory limits. Limits like the newest ceiling of $12.394 billion signed into existence by President Obama just before New Year and after a strict party line vote. Before the vote, most debt clocks shattered the old limit effortlessly and kept going. Of course, this is because most debt clocks aren't aware of the distinction between debt, and "debt subject to limit." (Not to mention on budget and off budget debt). Stone & McCarthy, however, get the difference. Their report, issued today, does a deep dive into the statutory limit, how long the new limit is likely to last, the political ramifications to the administration of raising, once again, the limit, and the nature of fiscal policy in the United States in general. Our favorite passage:
Based on our projections for Treasury borrowing needs, we think Treasury will have room under the debt ceiling until March 1, when it will settle the 2-, 5- and 7-year note auctions sold in late February. If a higher debt ceiling isn't signed into law before March 1, Treasury has several tools that it can use to avoid disrupting its marketable borrowing activities. Treasury can suspend issuance of non-marketable securities to the Civil Service Retirement and Disability trust fund and to the so-called G-fund, which is a component of a defined contribution plan for federal employees. The Treasury Secretary can also declare a "debt issuance suspension period," which allows him to redeem securities held by the Civil Service Retirement Trust fund ahead of schedule. (After the debt limit crisis has passed, the Treasury Secretary has to make the trust funds "whole.") Treasury can also resort to other measures, such as suspending issuance of non-marketable securities to state and local governments, i.e. SLUGs.
Aside from introducing the debt management tool "SLUGs" to our collective vocabulary, there is a larger take-away. Namely, the Treasury has any number of obscure and Byzantine accounting tools with which to avoid statutory default, but that come late February or early March, it will be time to vote again.
In essence, the debt ceiling is only meaningful insofar is it requires our elected representatives to go on record loudly to endorse measures that will eventually cave in the fiscal skull of the country. True, this hasn't deterred anyone from raising the limit, but it has proved a useful partisan finger-pointing tool when the minority party does not have enough votes to actually derail a limit raise. Ah, the two-party system. Nothing is accomplished, but there is always someone to blame for it. Still, at the very least we have a nice list of those who permitted their personal and party agendas to motivate them to kick the can, just one more time, really (until March) down the road. Are you keeping track, Zero Hedge readers?
Even if you aren't keeping track, we have named January official "National Debt Education" month here at Zero Hedge. We have a number of deep-dive analysis pieces in the works that will give Zero Hedge readers unprecedented insight into the massive gravitational well that is our national debt and the enigmatic morass that is the Department of the Treasury. In fact, we will chance the prediction that we might show you the national debt in a way never presented before. Stay tuned. We think you will like (hate) what we have to show you.
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"$12.394 billion" - If only...
Should be trillion.
Maybe a long scale billion - http://en.wikipedia.org/wiki/Long_and_short_scales
Or the . should be a ,
"We have a number of deep-dive analysis pieces in the works that will give Zero Hedge readers unprecedented insight into the massive gravitational well that is our national debt and the enigmatic morass that is the Department of the Treasury."
AKA Black Hole.
Now who was it that said deficits don't matter? That you don't measure deficits in dollars terms but as a percentage of GDP? This is precisely why inflation is a tool to be used to continue to Ponzi. Push up one side, then push up the other.
Don't EVER assume these people are stupid. I see that a lot on ZH and I've been guilty of saying so myself in the past. Never underestimate how motivated a small group of people can be who have a common goal in mind, power in their hands and the desire to distort and pervert the system. Small changes implemented by this group are greatly magnified when the vast majority of the population is dependent upon the system and thus willing to subvert their own standards of behaviour for another can of processed tuna fish. Or squid, as the case may be.
That comment is always used out of context. When Cheney said "deficits don't matter", what he meant was "deficits don't matter politically". And he was right for the most part. People don't vote to reduce the deficits.
I understand the context in which it was used by Cheney. Deficit spending is always a political issue. The Federal budget is by nature a political issue. Bringing home the bacon is a political issue. How do you separate the political issues from the non political issues. Please identify any issue before Congress that is not political in nature.
The word "political issue" to me simply means that it's OK for Congress to ignore the wishes or best interest of the people and think about what's in the best interest of the politicians when thinking and voting on the issue. Every Congress person on any one issue can explain why he or she voted in this or that way. Step back and look at the record over 10 years and you see patterns of special interest voting by many Congress persons that transcends their political ideology. And by special interest, I don't mean the speical interest of "we the people".
The "people" don't vote to reduce deficits, politicians vote or don't vote to reduce deficits. And on an every increasing scale over the past 30 years, those politicians are not voting in the best interest of the "people" but for themselves.
Why is it that every public poll asking for a list of general concerns that I've seen over the past two decades has "reduce the deficit" in the top 10 or 15. When you strip out the hot button issues of the day and look for long term trends, you see people have a major concern regarding Congressional deficit spending. People are trained to pay their bills and they don't understand how the nation is going to pay these bills. This is why it worries them. They quite logically think that sooner or later large deficits can't be good for them personally or the nation at large.
We eagerly await your roll-over report.
Treasury "stress tests" - can't wait!
Just hope these reports go online before March.
Will today be the day in which everyone realizes / starts acting upon the realization that government actions have just made everything worse... USD, Treasuries, commodities and stocks all plunging at the same time??? Or it will take some more time???
It will take a lot more time, IMHO. There are many of us who had believed that the house of cards would have started tumbling by now.
However, the ability to "extend and pretend" has morphed into the twilight zone. So now, it seems we could keep the zombie economy sort of ambulating along, just like the Japanese have been doing, for another decade or two.
Go figure.
Lets get this sob over with, send everyone a million dollars and finally crash this dollar pig. This sideways motion for the next 10 years is gonna suck for everyone alot more in the end. The sheeple can buy TV's and I will buy gold.We are in the end , going to end up in the same place anyways.
Rosenberg on Bloomberg just now
Host: Bernanke is out ahead of this economy (as in things are still very bad and in need of liquidity and stimulus)
Rosenberg: You're 100% correct - Bernanke gets it
The amount of work here is outstanding, I hope the ZH team is being well compensated.
Did everyone receive nice year end bonuses? ;)
They are laying up treasures in heaven, where moth and inflation do not destroy.
Treasury can suspend issuance of non-marketable securities to the Civil Service Retirement and Disability trust fund and to the so-called G-fund.
Laymans terms=stealing the publics money and replacing with an IOU=normal recourse and activity ongoing.
Oooh, I never thought about the G fund.
That revelation came out of left field for me. Of course, shame on me for not taking the time to read the documents and laws creating some of these various "government" piles of money. Who would have thunk that the "G" fund option the government so courageously offers their federal employees to "safe guard" their self directed retirement money could be played like a fiddle? Thank God the fund is eventually made "whole" after the manipulation is done.
God, we are such patsies.
There are more tricks, yet to be deployed.
New York City, 1975, gives a thumbnail education in one-hoss-shay repair.
Dont worry about this folks. We have Americans from harvard law school managing the sitiation. these are the smartesest peoples in the world. after all, they are from the Ivy League. Dont you believe in your American "institutions"?
Are these People stupid on wall street? Well gthey managed to lose trillions of $'s. That is a little beyond stupid. And they had to go to harvard to learn how to do it! AIG could have just hired a crack ho on 31st and lexington. What is under appreciated is their ability and proclivity to commit crime (theft, bribery,etc.). Exactly which part of the Harvard curriculum taught them how to commit crime?
economics 101
And their SLUG cheerleaders.
With that new vocabulary usage, I'm having a vision of "Eat Slugs!" combined with Ron. We know how well that turned out for him... Too bad it can't be Timmaw casting such spell with similar results. Oh wait, it just might.
Thanks, Marla--can't wait for the reports
Come to think of it, there's a fix that's so old it pre-dates the Fed itself. The first "greenbacks" were negotiable scrip issued to pay for the Civil War. The 1862 Legal Tender Act made the notes legal tender for everything except paying interest on U.S. Treasury debt (!) or paying custom-duty taxes (heh.) The issuance was either implicitly or explicitly constitutional. As far as I know, the authority to issue new U.S. Notes is still in the statute books. If not, it can be resurrected by passing a similar law.
Granted that it's explicitly printing money, but it's a viable nuclear option should the exingency arise.
"And downward, downward we go..."
It's awfully sad to see America slide into poverty, and the sheeple do nothing. In Iceland they also got butt *ucked, but at least they are now standing up straight whilst getting butt *ucked. Who knows the IMF might even give them a kiss after the act.
Though I love the humor in the comments, and hey, what the hell are ya gonna do, but millions are already hurting and millions more will.
I got my annual social security benefit statement in the mail today. I laughed. I am in my early forties. I know that I will never see one thim dime of that money. I am greatful that I have been able to send my boys to college to obtain advanced degrees in fields that will be useful somewhere else in the world. Costa Rica is looking better and better every day.
Belize, imo. easier to gain citizenship, no reciprocity agreement with the US as of yet (makes it easier to hide off-shore income from Uncle Sam) Belize currency pegged too US dollar, better real estate opps
I love snippets from restricted pieces that reinforce a singular point of view.
Hint - Journalistic integrity is maintained by open access to the source data.
Of course, whoever said ZH needed to have integrity, it is a blog with anonymous writers (for their protection of course.....)
I checked the website, you need to provide a name/password/company in order to receive free access for a month but you need to register by calling in since automatic free registration is down.
More disinformation to come I'm sure, I'll stay tuned.
I know, you're as pissed as I am that we shorted everything because ZH said things were bad. Then we bought a ton of gold, and darn it, wouldn't you know it, that too is collapsing. So we sold at a loss and bought survival equipment instead and stopped reading ZH and turned to Bloomberg. Greenshoots all over the place, so now my hunting rifle and skinning and gutting knife are on the Ebay and with the proceeds I'm going long financials. It's a roller-coaster.
Either that, or you're just having a bad day gorgeous.
you're killin' me
Umm... Maybe Marla was just trying to honor 'fair use' and not simply rip off the entire report? Your presumption of deliberate disinformation is just...weird. You really must be having a bad day.
phaesed, as one of my favorite comment contributors, i'm not sure where you're coming from on this one.
because i really don't believe you think the treasury actions are prudent, there must be something else you see going on here.
to me, ZH's efforts at clarifying the subtleties of our debt situation seems like a public service, considering how much detail we get from the MSM. perhaps this is old-hat to you. i'd be glad (seriously) for your additional comments as this (dis)information becomes available.
if you see an inherent bias, please share it. i've seen a couple of articles that lean to the sensational, but generally the ZH tone is consistent, and hugely valuable to me.
at this point, does it really matter? We know it's bad, and we know it's actually worse than that, whatever the source.
Thanks for your continuing efforts in regards our national debt, Marla. I'm looking forward to the upcoming pieces.
Perhaps Timothy Geithner could author a few during his in between jobs period coming up soon?