Congressional Budget Office
Alarms are going off in assorted plunge protecting offices, now that the USDJPY has breached the 102.000 "fundamental" support level, below which the Yen can comfortably soar to sub 100.000 in perfectly even 100 pip increments. The first trading day of February has brought another weaker session across Asia though some equity indices such as the KOSPI (-1.1%) are in catch-up mode given they were shut towards the back-end of last week. Over the weekend, the Chinese government published its latest official manufacturing PMI which showed a 0.5pt drop to 50.5, a six-month low, and consistent with consensus estimates. DB’s Jun Ma believes there was some element of seasonality affecting this month’s result including the fact that Chinese New Year started at the end of January (vs February last year), anti-pollution measures in the lead up to CNY and efforts to control government consumption around the holiday period. The official service PMI was released overnight (53.4) which printed at the lowest level since at least 2011. The uninspiring Chinese data has not helped market sentiment this morning, with the Nikkei plunging -2% and ASX200 once again under pressure. S&P500 futures have fluctuated around the unchanged line this morning although if support below the USDJPY fail solidly, then watch out below. Markets in Mainland China and Hong Kong remain closed for Lunar New Year.
Mr. Speaker, Mr. Vice President, members of Congress, fellow citizens:
...Make no mistake: the consequences of our actions are here. And the days of the United States as the world's dominant superpower are finished.
...No, this may not be the country that you all grew up in. But it is the state of our union... whatever remains of it.
For the first time ever, working-age people now make up the majority in U.S. households that rely on food stamps.
After a botched rollout that was universally panned, it may seem like things are finally moving more smoothly for Obamacare. But 2014 and beyond promise more turbulence for consumers, with premium tax credits likely to be another crisis.
White House Guides Down Obamacare Enrollment Target, Says To Focus On Demographics; Refuses To Give Demographic DataSubmitted by Tyler Durden on 01/06/2014 21:13 -0400
“That was never our target number. That was a target that came from the Congressional Budget Office, and it has become an accepted number. There’s no magic to the 7 million. What there is magic to is that in the month of December a million Americans signed up for insurance.”
– White House aide Phil Schiliro, interview on MSNBC, Dec. 31, 2013
The resilience that has long been one of America's remarkable traits was on display in 2013. Not only did businesses create 2 million jobs, but the struggling economy actually grew and profits and stock prices soared to near-record levels. Still, five years into the Obama presidency, the economy is grossly underperforming. Contrary to the dominant media narrative, it's not bad luck or the financial crisis to blame, but bad policies — from the $860 billion "stimulus" that didn't stimulate to the Dodd-Frank financial reform that killed lending. Last year was a challenging one for entrepreneurs and other productive Americans. No fewer than 13 new taxes were put into place. Big government now consumes one of every four dollars of our GDP and is getting bigger. Entering 2014, we face problems, including taxes and spending, that neither the White House nor Congress is addressing. In the following charts, we look at a few of the more alarming and intractable ones.
The history books will not look kindly on this neglect.
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 13:26 -0400
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.