With the House, as previously reported, now out of the debt ceiling negotiations, it is all up to the Senate to reach some compromise with 4 days until the midnight of the first X-Date. Unfortunately, or maybe fortunately, at least going into Monday, there is no deal, and not even a glimmer of what a potential deal may look like. Yes, Democrat leader Harry Reid did said on Sunday that he had a "productive conversation" with Senate Republican leader Mitch McConnell on efforts to reopen the U.S. government and raise the federal debt limit, Reuters reports, but that's as far as it gets. "Our discussions were substantive, and we'll continue those discussions. I'm optimistic about the prospects for a positive conclusion to the issues before this country today," Reid said in remarks on the Senate floor. He did not provide any specifics of the conversation. Democrats and Republicans remain divided over spending levels in any temporary government-funding measure.
Normally Treasury Bills are not something discussed around the dinner table or hotly debated on the business news channels. As UBS notes, the fact that the Tbill market has become the focus of attention is an ominous sign, and indicates that the stalemate over the debt ceiling could have profound effects. While TED-Spreads, and financial CDS were the key indicators in 2008, now we must watch money fund flows, and Tbill forwards. In a sense, the Tbill market is the proverbial canary in a coal mine for the US financial system. The canary is not yet back in good health.
Pulling from an extensive record of public speeches and FOMC meeting transcripts, Goldman Sachs reviews Fed Chair-nominee Janet Yellen's views on a number of policy-relevant issues.
The Treasury Department has warned that the continued failure by Congress to raise the debt ceiling would leave the United States unable to pay all of its bills and may force the country to default on its government bonds. Here are some helpful answers to the most common questions about the debt ceiling crisis...
A plausible debt ceiling agreement is finally on the table, but BofAML doesn't expect a deal until next week or later.
Here's where we stand...
Curious why algos suddenly are buying because other algos are buying because other algos are buying, pushing the S&P higher by 10 point in virtually no time? Simple. It appears at least one vacuum tube decided to scan the news archive, and fell upon the Politico story from 7 AM Eastern which said that the Republicans and Democrats had met in a secret meeting.
As we have discussed previously, the "partial government shutdown" that we are experiencing right now is pretty much a non-event - especially with the un-furloughing of The Pentagon. Yeah, some national parks are shut down and some federal workers will have their checks delayed, but it is not the end of the world. In fact, only about 17% of the federal government is actually shut down at the moment. This "shutdown" could continue for many more weeks and it would not affect the global economy too much. On the other hand, if the debt ceiling deadline (approximately October 17th) passes without an agreement that would be extremely dangerous. A U.S. debt default that lasts for more than a couple of days could potentially cause a financial crash that would make 2008 look like a Sunday picnic. If a debt default were to happen before the end of this year, that would bring a tremendous amount of future economic pain into the here and now, and the consequences would likely be far greater than any of us could possibly imagine.
"Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit" Anthony Coley, spokesman for the Treasury Department.
The BPC, whose initial analysis of the US default has become the staple "go-to" analysis for Treasury cash obligations and key events in the day surrounding and following the X-Date, has released a new update on when the US runs out of money. The latest: October 22 - November 1. Which means that if it so desires, the GOP can and probably will delay a debt ceiling bargain until the last possible moment which may well be, appropriately enough, Halloween. In the meantime, the US Treasury now has about $40 billion in total cash on hand and available extraordinary measures and declining fast.
We strongly suspect that both government debt growth and money supply inflation will continue unabated – any pause will immediately bring about the kind of short term economic pain these policies have explicitly sought to prevent and will therefore be quickly reversed. It is not unlike the situation the revolutionary assembly of France found itself in during the late 18th century: when it issued new money, industry seemed to revive. As soon as it stopped, industry slumped again. And so it was decided to issue ever more money, until the entire scheme blew up. There can be little doubt that modern-day governments are on the road to a similar date with destiny – and lately the speed at which they travel toward it has increased markedly.
“Diminishing Superpower” This was the headline streaking across the weekend edition of the Jakarta Globe, one of the largest newspapers in Indonesia. The photo beneath was of Barack Obama, his lips pursed and eyes steeled as if he was fighting back tears. Or perhaps staring off into the fiscal abyss. The subheadline read: “Obama’s APEC absence symbolic of US waning influence in Asia.” It’s so obvious to everyone else that the US is in terminal decline. As history has shown so many times before, this is exactly how the end begins.
Argues that despite the growth the of the state in response to the crisis, what characterizes the current investment climate is the weakness of the state. This asssessment is not limited to the US, where the federal government remains partially closed.
David Stockman, author of The Great Deformation, summarizes the last quarter century thus: What has been growing is the wealth of the rich, the remit of the state, the girth of Wall Street, the debt burden of the people, the prosperity of the beltway and the sway of the three great branches of government - that is, the warfare state, the welfare state and the central bank...
What is flailing is the vast expanse of the Main Street economy where the great majority have experienced stagnant living standards, rising job insecurity, failure to accumulate material savings, rapidly approach old age and the certainty of a Hobbesian future where, inexorably, taxes will rise and social benefits will be cut...
He calls this condition "Sundown in America".
Here's a new and very bizarre entry for the annals of "the dog ate it" excuses. According to Reuters, Montana man Wayne Klinkel, who last year pieced together the remnants of five $100 bills eaten by his one-eyed golden retriever, Sundance, is sporting a $500 check he says he received this week from the U.S. Department of the Treasury to replace the digested funds. Sundance sniffed the wad of bills out of a car cubby space while waiting for Klinkel and his wife to return from lunch, and the canine made the currency his lunch.