Boehner’s reply was as vile and dishonest as you might have expected.
If the government is forced to slash spending when the money runs out. — We’ll be doing a 1937 squared.
I hope and pray that Obama’s lawyers discover that the 14th amendment solution is valid after all. Because otherwise we’ll be looking at very dire things, even if the markets stay calm.
It sounds to me that PK wants the markets to crash. (He’s ‘praying’ for a lawyer to find a loophole?) Maybe he thinks a 1,000 point DOW drop would get those “vile and dishonest” Republicans to cave in.
The fact is that the market’s collective response to the possibility of a US default has been extremely muted.
Ten-year treasuries are not showing any signs of stress. The current yield of 2.95% is significantly lower than just five months ago.
Stocks are doing just fine. The S&P is 5% higher than a month ago. We are back to the levels seen in May.
I don’t see any significant stress in the Muni market either. MUB (index) is just a tad off recent highs.
How are these results possible? Easy.
The Smart Money on Wall Street is 99.5% convinced there will be a deal.
I’ve never been so sure about that “smart money’ thing, (having spent a lot of time there) but I agree with this thinking. There will be a deal and there won’t be a default. But the deal that is going to be struck is going to stink. It will put the issue of default back on the table in less than eight months.
This reality will push the hand of Standard and Poor’s. They have said that the political will of the country to tackle tough problems was central to their decision to put the USA on their watch list. The US will fail on this if there is a short-term patch on the debt limit. S&P will have to follow through. They will drop the US by year end (or they have no balls).
Krugman is not looking in the right places for evidence of the stress that is building. Some places I see as signs of problems:
-Gold is reacting.
-The safe havens of Swiss Francs and Yen are being sought after.
The Swissie is about to break an important barrier. By the end of the week a lousy 80 Centimes will buy a Dollar. The Yen is not at a record, but it might as well be. We are at the panic levels of March 2011 and way back in 1994.
-Some stocks like AAPL are trading as if they are safe havens. (That’s crazy!)
-The most significant evidence of trouble brewing is an issue that I do not have a chart to show you. It is something that is not (now) being reflected in the markets.
I stay in touch with a number of folks who push money for a living. I am repeatedly hearing that there is stress in the funding market. There is plenty of liquidity and the cost is zero, but financing to fund assets (positions) is drying up. It’s becoming increasingly difficult to finance large liabilities. Where funding is available, it’s only for very short maturities. These issues are showing up in the repo market, euro dollar deposit market, money market funds, swaps markets and interbank lending.
I’m very concerned that the "smart" money on Wall Street is positioned very poorly for what is coming. We are setting ourselves up for a big disappointment. It’s as if the Street is set up for a Non Farm Payroll of +600,000 and we get a -200,000 print. The reaction will be swift and bloody.
Cash is definitely Trash these days. This investor is long as much cash as I can. I’m convinced that big volatility is in front of us. Being cash rich gives me a chance to play in markets where values are being presented.
I may miss out on what could be a soft landing and a happy ending. I never did believe in fairy tales.
Update:
In the hour and a half since I wrote this the President has came out with a threat of a veto. That would be an immediate default and downgrade. Like I said, I’m worried about that “smart money” thinking. Also, the USDCHF broke the 80 barrier. Gulp!
Bruce
there is only change---no matter how much this is denied---
THERE IS ONLY CHANGE
krugman continues to be a vile and dishonest piece of shit. how is this news to anyone?
But I must say, reading comments on Krugman's blog when the Libs aren't getting their way is almost as entertaining as reading comments on the Denver Bronco blog after a big Bronco loss (I'm a Raider fan). Their dismay, anger, and yet pervasive wussiness is truly a joy to read. Some are calling for Obama to basically declare himself a Roman emperor independent of Congress (via the 14th amendment). Good luck with that.
I agree.
Trades in Gold broke 1616 and are testing 1620 and I am trying to readjust the bullion trade to keep up with other sellers who are also raising prices across the board challenging the 41.00 resistance in silver. If it breaks tonight is going to be somthing.
I am a Silver Bull, but today, OMG I am so busy making and closing orders I can barely stay here and read fast enough to catch up with Zero Hedge's writing....
I think that the Government is smoking something because there might be a Default. We cannot rule that out.
You can't, but the insiders aleady are positioned to maximize gains on a no-default conclusion.
That's what the hemming and hawing is all about. All those who are in cash will be sucking wind from the mavens who will profit handsomely when cometh the annoucement of a sorta deal----which excludes any possibility of a default.
But it has kept eveyone's eyes and ears glued to a fiction, while the Finance committee has been quietly stealing money left and right to pay off one contributor or another. Yet another smashing success using the old set the trashcan on fire 5 blocks away from the bank. Never fails.
No default.
Believe it. Act accordingly, don't buy the bullshit.
AA is de jure and should be de facto; in fact Weiss says it should be C-; hard to disagree when you add up all the potential liabilities and come quite close to $500T. And then there's the quadrillion of derivative overhang throughout the world. (got enough coke, Jamie?)
Probably 50% or the working population (thoses that are not compter programers/doctors/teachers/union member, etc) must compete against a world wide labor oversupply that will work for $200/month and live in bunk bed dorms. So companies will never create jobs in the US and the housing problems and deficits will only compound unitl the safety nets (social security, pell grants, financial aid for students, food stamps, welfare, medicare, etc) are cut. Then the problems get serious.
Right... here in Nicaragua my wife just got a call center job for Capitol One which pays a fortune for here, $ 500 a month. Experienced, bi-lingual Nicaraguans with international work experience fight for these positions... other professional jobs pay a pittance. Capitol One, I know from experience, is a piece of shit. Imagine handling many rightfully angry clients.
congratulations! (???)
"It’s as if the Street is set up for a Non Farm Payroll of +600,000 and we get a -200,000 print. The reaction will be swift and bloody." I totally agree with this sentence. They think what is being done is just theater and nothing more thinking that they won't allow default to happen. But in reality many of the congressmen have held steadfast about getting what they want or letting the whole system default. Some of them want it to happen anyway, this way they can build up a new system.
I have a feeling that's exactly what they want, at the end of the day. Can they retain control in the interim, though, to do it?
My prediction? PAIN!!!
How can anyone think that the Great Depression was characterized by the government doing too little?
They only call it the Great Depression in America you know...
I have to agree with the "smart money" no default here. Even if they have to go the ludicrous 14th amendment presidential dictatorship route. Granted I already know where this boat is going and positioned accordingly. I'll leave the active trading to you pros and I'll sit in my safe haven and wait for the fiat inferno to pass.
Still waiting on someone to take up the Ron Paul option, stick the Fed with the 1.6 trillion in write downs...or are we not allowed to harm a private institution like that?
The best outcome would be the FED write down, voila, a lot less debt...so that is very likely not to happen...anything good for regular folks and bad for big banks is very unlikely from our govt...if a standoff causes problems, big money will find a way to be sure any crisis punishes regular folks til they cry uncle
"Cash is trash", hardly. Why are bank accounts and corporate balance sheets chock-full of it, hoarding? You don't, in the long run, make money on the same crap that everyone else is hoarding, especially when the masses start dishoarding.
The day that I never have to see/hear Paul "shifty eyes" Krugman again will be one of the happier ones in my life.
But then you'll have to deal with Zombie Paul Krugman, who you can't kill.
I'll drink to that.
Can Krugman tell me how effective all the debt ceiling raises have been for the US economy in the past-or how they just sort of got us to this point again?
This is how a pyramid scheme economy operates when it folds. All western economies operate on a basis of perpetual growth and ponzi mechanics. It's a real failure of humanity to not understand how a sustainable growth model in population and money supply would benefit longterm health.
Its a failure of academics not to recognize that the economy is based ona slow growth, fast contraction pyramid.
Its going to be 1937 2x, sure. Not because of Republicans but because the whole damn system is based on a LIE and run by criminal behavior
Contraction of debt equals deflation..whether it is public or private debt.
Deal or no deal- The AAA rating is history. They will never do enough to make progress on the debt.
Krugman is a total joke. The charlatans never have an answer when you ask them when the deficit spending should stop.
I often read Krugman for pure entertainment value, but nothing else; his ideas and postulates are so far off the wall that he has discredited himself over the past 3 years.
Keynesian economists like Krugman are a globally disgraced profession, as Eric Sprott said last year: "the world is now going to pay for the funeral of Keynesian Theory."
Paradoxically, although Keynesians are well educated, when it comes to the subject of economic theory, they are completely closed-mined to any and all ideas that are not Keynesian, which they believe to be the holy grail.
Krugman, in particular, knows better, but his unbelievably huge ego forces him to promulgate the daily propaganda from the Power Elite that he knows is deceitful and unethical.
Last year, Vedran Vuk said it best when describing Krugman, but he said it far more eloquently that I ever could: "propagandists may have an outer circle of hell waiting for them, but I'm sure that the darkest corners of Dante's imagination are reserved for folks like Krugman, who spread deceit, while being fully aware of the truth."
So those adjectives Krugman used, namely "vile and dishonest", are far more appropriate to Krugman himself!
And then, they only have blank stares when you ask them, "Who's going to pay for all this?"
I guess Krugman would say, "The millionaires and billionaires!"
Yeah, but that's crazy talk in their world. Only an idiot would try to live within the means of others, when you can grow fat off of them for free instead.
Don't worry Bruce, it is all going according to plan. We should see the full realization of the mechanics of the plans within 20-36 months.
Could there be a better quote from Krugman proving how worthless a Nobel Prize in Econ is? This quote is classic! What else should happen when an entity runs out of money?! Talk about a line that sums up all the current problems with our deep thinkers.
"If the government is forced to slash spending when the money runs out..."
Almost as worthless as the Nobel Peace prize....
Bruce, I never met the 'smart money' folks either. Did meet some folks that thought they were 'smart money' till they traded in their Rolex for a barrel with suspenders
'smart money' = connected, front-running money
Which these days is likely tied to an HFT algo that head fakes so fast, mere mortals can't see it until it is too late (Tyler and Nanex have to tell us later after digging it up from the historical trade logs (all 2 seconds of them)).
NA, if that is what 'smart money' means in 2011, I'm not qualified to even have an opinion. But, in the 'old' context, there was(?) always this meaning that the 'smart money' had impecible timing -- always moving in at the right time, or distributing at the top, etc. I've worked with some folks that you would think should have been classified as smart money, but they sometimes made money/sometimes not. Now, I'm not saying that they weren't sometimes privy to 'insider info' that made them money -- but that isn't being 'smart'. And I'm not kidding when I say I saw folks with LOTS of money go down hard, or loose their family's fortune through poor investments, acquisitions, etc....I may just have seen the exception to the rule....
I know a guy who 'made' $90+ million in the dot com boom... but held those positions through the entire bust. He got bailed out though so he is rich despite being a dumbass.
The deal will be enough to push the DOW up another 2000 points, gold 300$ and silver to 60$
The good guys always win you know. At least that's what Disney always says.
Did you mean $3,000 or $30,000...I must have missed it in the headline. What if the "deal" is already priced in? According to the author it is. So then the impetus for a correction would be if NO deal happens, right? Dow 9500, Gold 1800, silver 50 by August 3?
If that happens, I am gonna just to have to ride it all the way to 60.
Thank god the Markets for here should be closing, now China who likes to back 50,000 trucks up to buy hand over fist hopefully will kick it over.
Someone bash my head in with a lead pipe.... I feel like I just spent the night with my first girl and cannot think straight.
People are in short maturities because they don't know whether to zig or zag. They're positioned to move once the path is clear. Otherwise, they're letting the gas bags play...
When in doubt try "ZigZag". Or just use dollar bills...Nah taste bad.
Yup, that's exactly what I'm doing. I've lost all conviction....for a lot of asset classes.
I'm loading up on Bills and will be ready to pounce when/if we get some clarity.
Ths LAST thing I'm going to do is lose 6-12 months of gains.