Congressional Budget Office
David Stockman's exclamation at the "betrayal" realized within the latest so-called "festerng fiscal" budget deal is taken a step further with Peter Schiff's head-shaking diatribe on Congress' inability to show that it is truly "capable of tackling our chronic and dangerous debt problems." So America blissfully sails on, ignoring the obvious fiscal, monetary, and financial shoals that lay ahead in plain sight. I believe that will continue this dangerous course until powers outside the United States finally force the issue by refusing to expand their holding of U.S. debt. That will finally bring on the debt and currency crisis that we have created by our current cowardice.
CBO estimates that U.S. may be able to push the debt ceiling deadline to as late as June of next year, but OECD is already freaking out about the prospect of a U.S. debt ceiling bind....
Somehow, Fed head Bill Dudley has managed to encompass the entire "we must keep the foot to the floor" premise of the Fed in one mind-bending sentence:
- *DUDLEY SEES 'POSSIBILITY OF SOME UNFORESEEN SHOCK'
So - based on an "unforeseen" shock - which he "sees", and while there are "nascent signs the economy may be doing better", the Fed should remain as exceptionally easy just in case... (asteroid? alien invasion? West Coast quake?)
"We're Stuck In An Escher Economy Until The Existing Structure Collapses And Is Rebuilt On Stronger Principles"Submitted by Tyler Durden on 11/09/2013 12:26 -0500
1. Even if the economy returns to full employment under existing policies, it won’t remain there after (and if) interest rates normalize.
2. Based on today’s debt and valuation levels (charts 8-9, for example), rising interest rates will have an even harsher effect than suggested by the 60 year history
3. Contrary to the establishment’s “sustainable recovery” narrative, the most plausible outcomes are: 1) interest rates normalize but this triggers another bust, or 2) interest rates remain abnormally low until we eventually experience the mother of all debt/currency crises.
We’re stuck in an Escher economy (see below), thanks to the impossibility of the establishment economic view, and this will remain the case until the existing structure collapses and is rebuilt on stronger policy principles.
What are the odds that the long-term trend towards lower participation is going to turn around soon? I would say, "Not high".
It is a common view that the shutdown, the debt-limit debacle and the repeated failure to enact entitlement and pro-growth tax reform reflect increased political polarization. John Taylor believes this gets the causality backward. Today's governance failures are closely connected to economic policy changes, particularly those growing out of the 2008 financial crisis. Despite a massive onslaught of legislation and regulation designed to foster prosperity, economic growth remains low and unemployment remains high. Claiming that one political party has been hijacked by extremists misses this key point, and prevents a serious discussion of the fundamental changes in economic policies in recent years, and their effects.
If you’re anything like us, you may have reached the conclusions that:
- Our elected officials are charting a course to a fiscal disaster.
- The Fed is repeating past mistakes by setting us up for another bust.
After the drama of the debt ceiling debate and the Fed’s non-tapering surprise, we see no reason to doubt these views. But the latest developments got us thinking, and we have an unusual proposal.
Dispassionate discussion of some of the vexing issues.
Some confidence tricks have characteristics that don’t quite fit the Fonz. Take the swindles known as Ponzi schemes. These are tricks that need an endless supply of participants to sustain confidence and stay alive. Once the participant pool depletes as it eventually must, the tricks are revealed as scams. Whereas Fonzies can persist indefinitely (at least in theory), Ponzis eventually collapse. Note that the U.S. has already passed its Ponzi point by Minsky’s definition. According to Minsky, borrowing qualifies as Ponzi finance whenever fresh issuance is needed to fund interest on existing debt. Based on the common assumption that the U.S. would miss its interest payments without regular increases in the statutory debt limit, this is indeed the case
So what exactly did Reid know and when?
- *UNITED STATES' AAA IDR RATING MAY BE CUT BY FITCH :3352Z US
- FITCH SAYS PUTS U.S. ON RATING WATCH NEGATIVE AS U.S. AUTHORITIES HAVE NOT RAISED FEDERAL DEBT CEILING IN A "TIMELY MANNER
- *FITCH STILL SEES U.S. DEBT CEILING TO BE RAISED SOON :3352Z US
- *FITCH SEES RESOLVING US RWN BY END OF 1Q '14 AT LATEST
- *FITCH STILL SEES U.S. DEBT CEILING TO BE RAISED SOON :3352Z US
- *FITCH SEES U.S. ECONOMIC GROWTH REVERTING TO 2.25% AFTER 2017
Would Obama push his pals off a cliff to get a deal?
The Chief Economist at Citi Willem Butler has said today on CBC in an interview that the fiasco over the US budget and the lack of money is nothing more than irresponsible on all political wings and that the country is being run by Munchkins in the Land of Oz.
The major headline of the day is the pending government shutdown in the Land of the Free. This is nothing more than an obvious symptom that they have passed the point of no return. As we have routinely discussed, the US government now fails to collect enough tax revenue to pay interest on the debt and cover mandatory entitlement spending. They’re already in the hole before they write a single check for anything we consider ‘government’, from national parks to the Internal Revenue Service. Basically all the stuff that will be shut down now. Unless you missed your IRS agent today, it should be clear that all this stuff they waste money on is completely... unnecessary. Or can/should be privatized.
There may be temporary 'benefits in terms of employment gains' if the Fed creates an even more gigantic echo bubble than it has already done. We are willing to grant that much. The Fed apparently believes these days that there should be no limits whatsoever to the Fed's monetary pumping. 'Inflation' targets? Forget about it! Asset bubbles? Who cares! It is as if the past 20 years had not happened – as if they had simply erased the whole period from his memory. Do they really believe that pumping up another giant bubble will have more benefits than drawbacks? Where does it all end? However, there is no such thing as a free lunch, and there cannot be an 'eternal boom' by simply continuing to print, as once envisaged by Keynes. All that will happen is that the ultimate disaster will be even greater. In fact, is seems ever more likely that the next disaster will be the last one of the current monetary system.
With a government's October 1 shut down - temporary of course - now seemingly inevitable, and more importantly with the peak debt ceiling negotiations due in just about a week after which point the Treasury will run out of money, many wonder what comes next. That this is happening just two short years after the dramatic August 2011 debt ceiling impasse, when the market tumbled 20% and likely slowed economic growth is still fresh in everyone's mind, is hardly helping matters. Add a potential political crisis in Greece and Italy, and suddenly a whole lot of unexpected variables have to be "priced in."