Peter Orszag

The beast is howling - and Krugman thinks it's his cat purring.

As reported previously, when Bloomberg broke the news two days ago, it now appears that the official appointment of Jack Lew as the new SecTres will take place tomorrow. From Bloomberg: "President Obama will announce tomorrow that White House Chief of Staff Jack Lew is his pick for Treasury secretary, person familiar with the matter tells Bloomberg’s Han Nichols." In other words - goodbye Timmah: best of luck writing your new book, which in the tradition of every ex-public servant who departs the government where they kept their mouths firmly shut, we assume will be all about bashing Tim Geithner.

Bloomberg is out after hours with news that was expected by many, but which was yet to be formalized, until now: namely that following today's flurry of contntious nomination by Obama, the latest and greatest is about to be unveiled - Jack Lew, Obama's current chief of staff, is likely days away from being announced as Tim Geithner's replacement as the new Treasury Secretary of the United States. In other words, Jack will be the point person whom the people who truly run the Treasury, the Treasury Borrowing Advisory Committee, chaired by JPM's Matt Zames (who just happens to also now run the notorious JPM Chief Investment Office which uses excess deposits to gamble - yes, you really can't make this up) and Goldman's Ashok Varadhan, global head of dollar-rate products and FX trading for North America (recently buying a $16 million pad at 15 CPW) will demand action from.

The schizophrenia in US equity markets (and by correlation all risk markets) is nowhere better highlighted than the last 24 hours of 2% swings in the S&P 500 on nothing more than boiler-plate comments from DC. However, as BofAML's Ethan Harris notes, "the year-end fiscal challenges in the US are more like an 'obstacle course' than a 'cliff' - politicians must navigate about 10 major policy decisions before year-end." We continue to expect a messy multistage deal on the cliff - with some wishy-washy  partial deal late December and more complete resolution (as it will be called) late Spring. We agree with BoFAML's view that until then, we suggest that investors fade the likely “press fakes” of an imminent deal, and brace for downside volatility. It seems to us that the negotiations remains stuck at square one.

In light of the epic fiasco from last August, when the US debt ceiling hike became a 2 month televized affair, culminating with the GOP caving, but not before the S&P downgraded the US (and in the process breaking the US stock market), Zero Hedge has long been analyzing the chronology of future debt breaches, as with the presidential election in November, what happens in the months and weeks ahead of it as pertains to the number one problem facing America - its lethal debt addiction - will be by far the biggest weakness of Obama's campaign. This is something we believe the GOP has finally understood, and they want a full replay of last August's insanity, to remind America just how broke (and broken) this country is. Yet it turns out all of our analyses have been for naught (if 100% correct). Because it is none other than President Barack Obama who has been kind enough to point out, that on September 30, 2012, or in just over 7 months, total US debt subject to the limit will be, wait for it, $16,333,900,000,000. Why is this an issue: because the final debt ceiling that Obama has been afforded with automatic Senatorial roll overs (even as Congress theatrically votes these down), is $16,394,000,000. In other words, with two months ahead of the election, the US will have a de minimis $60 billion in debt capacity. And since the implied burn rate is $133 billion/month this means that the United States will be in full blown debt ceiling hike chaos just as the final electoral debates take place. And one wonders why the GOP rushed to green light Obama an additional $160 billion in debt issuance. If indeed the $160 billion in new debt is added, the US may not even last to September before Tim Geithner is forced to start plundering G-fund and other retirement accounts. It also means that two months of America in a debt ceiling breach situation will deal a dramatic blow to Obama's reelection chances as the last thing the US population will want is a replay of last summer.

And so the comedy circle is complete yet again after none other than former White House budget chief Peter Orszag throws cold water in the face of the White House, the Treasury and everyone else who has so far been so stupid to continue to deflect blame for America's horrendous fiscal situation purely on S&P and its "colossal $2 trillion mistake." Because if the guy who up until a year ago personally came up with the White House's voodoo numbers is telling you they are full of shit (the numbers, not the White House), perhaps it does put the administration's claim that it is all S&P excel spreadsheet skills that are at fault, in a slightly different light.

GEITHNER SAID TO CONSIDER LEAVING TREASURY AFTER BUDGET DEAL

Explains why the market just ripped.

In the meantime, a cubicle at 270 Park is being prepared.

States can't have their proverbial cake & eat it, too. In times of economic and financial distress, they can jack-up taxes on "the rich," to their hearts' content, but they cannot do so without consequence. States prosper when the fortunes of "the rich" increase and share in the pain when they decrease.

David Rosenberg submits a list of the ten things that would make him bullish on the US economy. As precisely zero of these have a snowball's chance in hades of happening, we are not too concerned about Rosie leaving the "realist" fold any time soon.

• Peter Orszag: America must brace itself for turbulence (FT)
• ECB Flags Risks of Higher Prices (WSJ)
• Spain Plans Partial Nationalization of Savings Banks (Reuters)
• BofA Reports Loss on Costs Tied to Bad Loans, Mortgage Unit (Bloomberg)
• European Governments Weigh Bond Buybacks (WSJ)
• Portugal Vote Imperils Accord (WSJ)
• Obama Taps GE's Immelt to Head Economic Advisor Panel (Bloomberg)
• Hu defends Beijing’s Currency Policy (FT)
• GE Net Rises 31%, Tops Estimates Amid Finance, Health Gains (Bloomberg)
• Nigeria oil fund fears hit bond issue (FT)
• Ivory Coast's Gbagbo Faces Financial `Asphyxia' by EU (Bloomberg), bad news for bondholders

The market was up yesterday as PIMCO is set to get their equity on, Fed Ex plans to deliver a fuckload...

The man who probably more so than anyone else can be singled out as the person (behind the scenes) responsible for the destruction of America, first with his successful drubbing of every vestige of regulation, then his isolation of Brooksley Born and her all too prescient concerns on structured products and derivatives, and finally, with carrying over his debilitating management practices from Harvard over to the US in general for the past two years, just had his farewell speech, which in typical fashion can be summarized as follows: "I am smarter than you peasants, go to hell." For a more official summary of his valedictory, here is WaPo's Dana Milbank: "Summers's final performance was very much in character. He arrived 10
minutes late for the speech, his suit jacket open, his shirt pulling
tightly at the buttons, his suitpants stained on one of the knees. His
hair showed signs of bedhead, but it could have been mussed by Summers
during one of his morning meetings. He jiggled his legs while listening
to the introduction by EPI President Larry Mishel, who had some edgy
words for his guest. Although both men grew up in Philly, Mishel said,
"when he moved to Boston, he adopted the Boston Red Sox as his baseball
team. Me? I'm still a fan of the Fightin' Phils." Summers rushed to rebut this point - by insulting the home team. "If I
lived in Washington, I might still be a Phillies fan, too." There were
groans in the audience." And of course, it is not like it was Summers fault for doing anything to bring unemployment down even as total US debt under his watch increased by over $2 trillion: "On Monday morning, he went to the Economic Policy Institute, a liberal
think tank, to give his "perspectives on the past two years." But in his
remarks, he spoke of not a single wrong decision he made." So now that the disastrous, and hopefully final, reign of this distant Tatooine descendant is over, here are the three finalist to fill his extra wide chair, two of whom promise to do absolutely nothing to break Wall Street's stranglehold over the White House, and thus increase the odds for a widespread populist mutiny with each passing day.

The president's own former advisor, and now very much outspoken critic, Peter Orszag has joined the cool kids by releasing the following scathing oped in the NYT, whose topic is, drumroll, QE2: "by perpetuating an artificially low 10-year government bond rate, the Fed may be delaying the very fiscal policy action that the nation most needs, while doing little to boost an economy whose principal problem is not high long-term interest rates." The message, for anyone having read the prior two essays, or Zero Hedge, is nothing new. What is, is the massive onslaught by virtually everyone of any political and financial stature on this pretty much inevitable policy decision by Bernanke. The question we have is did Goldman's estimate that QE2 needs to be up to $4 trillion blow the party? Are expectations for future monetary easing so high (and unattainable) now that the market had to be artificially be pushed lower so there is some upside on November 3? Because for all those who believe that the Fed has found religion and thinks a strong dollar is suddenly a policy goal, we have two words: "Wake up."

And then there was one, even if it was a TurboTax One. Bloomberg headlines flashing that Larry Summers is dunzo in November. He follows such other economic failures as Romer and Orszag, both of whom left the economy in a far more horrendous state than they found it. We wish godspeed to Larry, and hope he managed to get thick windows in the limo that will take him to his next private sector job, presumably somewhere above the 40th floor in 200 West.

As we speculated previously, the sudden and unprecedented departure of Peter Orszag, the day prior to the US Budget's formalization (which incidentally never happened as now the US will likely not have a 2010 budget at all, for fear of disclosing to most Americans just how broke the country is ahead of mid-terms) was due to Orszag's disagreement with the administration's, and particularly Larry Summer's, inability to fathom that reckless spending is a recipe for bankruptcy. As the FT reports: "Peter Orszag, Barack Obama’s budget director, resigned this week partly in frustration over his lack of success in persuading the Obama administration to tackle the fiscal deficit more aggressively, according to sources inside and outside the White House." And so, as any remaining voices of reason realize they are dealing with a group of deranged Keynesians, soon there will be nobody left in the administration who dares to oppose the destructive course upon which this country has so resolutely embarked, which ends in one of two ways: debt repudiation, or war. And with the only remaining economic "advisers" being the trio of Summers, Romer and Geithner, you know America will somehow hit both of these mutually exclusive targets.