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These Are The Key Debt Ceiling Choke Points
As we noted earlier there are some 'possible' scenarios that enable payments to be made on Treasuries prioritized over other payments but it would appear the short-term Treasury Bill market is becoming not just increasingly anxious about a technical default but is bringing that "X" date closer and closer. The 10/31/13 bill had been the "most risky" of the short-term bills until this weekend but the lack of a deal and no indication of a resolution any time soon has seen risk piling up in the 10/17/13 and 10/24/13 bills - the latter now at 16bps (that is 4 times the yield on the 11/21/13 bill). The 1-month-1-year spread is still inverted (even as USA CDS compresses on the day).
Evidently, the "X" date is getting closer... 10/24/13 appears to be the new X-date now.
as is most clearly seen with the inversion of the 10/24/13 to 10/31/13 spread...
So depsite the politicians and strategists calls for specific dates, it would appear the market is becoming more and more anxious of the possibility of an actual missed payment on short-term bills.
The reason, well among other things, the un-furloughing of 400,000 Pentagon workers will mean a few more days cash burn than many expected last week... As we noted previously,
"since the coffers of the Treasury are finite, and since there rate of
cash inflows is still the same, the fact that suddenly 400k more people
will have to be paid salaries will mean that the government's cash will
ran out that much faster, likely well before the October 17 X-Date,
meaning the debt ceiling deadline, and surrounding negotiations, just
got pushed forward."
Charts: Bloomberg
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Whitehouse floating Nov 1 via Bloomberg earlier today
Banks like defaults since they can charge higher interest rates henceforth
There is no reason why Fedwire can't be used to pay the T-notes / bonds out of the current cash flow. Everything else takes a 27% haircut. Problem solved. Next?
If you are saying that everyone's money will be confiscated when they try to wire money and everyone else takes a 27% haircut, then a systematic banking collapse would be next. No one would have faith in our banking system.
What are we missing?....there is always some distraction going on to take attention away from a real disaster. Were the new stats to be released so bad, that a shutdown makes it easier to point fingers? I firmly believe this is a big show being put on by both parties due to some other probably far worse disaster/situation.
I think that's exactly right. I've been trying not to slip too deep into conspiracy-land, but there are so many things coming to a head this fall that it seems like a shutdown is the best way to distract from them. It's taken attention away from the disastrous implemenation (and costs) of Obamacare, the needed USPS bailout, chaos in the middle east (has anyone looked at Egypt or Libya lately?), the fact that the Fed can't taper AT ALL... just too many potential crises, many of which can be covered up by shutting down data reporting and distracting people with this show. Would love to see what's happening behind the scenes.
Remember the potential for war with Syria? Only a short few weeks ago? You think any of this would have seen the light of day had the US gone ahead an attacked Syria, assisted the "rebels" and fought for regime change in Syria? We were this close to going to war and then Obama couldn't pull it off. He either couldn't or wouldn't perform and the script had to change. Assuming they are still following a script. Obama, their man was not able to get it done. Imo they are now off script and the deadlines are coming full steam at them.
During 2012 fiscal yr, Treasury issued following debt-
Notes (less than 1yr)- $708 B
Bills (2yr to 10yr) - $137 B
Bonds (30yr) - $178 B
TIPS - $102 B
Please note Fed purchased no Notes, and bought $480 B in Bills, Bonds (not sure on TIPS???) but Feds focus on longer duration means Fed is buying $480 B of a possible $417 B in new issuance...or put another way the Fed is buying @ 120% of Treasury longer dated issuance (if TIPS are not Fed purchased, then Fed is buying @ 160% of Bill / Bond issuance). Think on this a little when tapering or economic interest rate sensitivity is being discussed.
Seems QE4Eva is allowing Fed to mop up somebodies longer duration rollovers they are no longer interested in rolling over...
China perhaps?
Liberals complaining the Republicans are learning to negotiate from Obama...
Does this take into consideration the cost of keeping national parks and memorials closed? If the un-furlough will make the ceiling closer, then that would be saying the shutdown crisis was built in to debt ceiling crisis. Otherwise they would have been paid anyways if the government stayed open...
If we truly had a two party representative government, I would say maybe they're taking the furloughs off to try to play chicken with the Republicans and speed up the process of going toward default. Being that we know the two party system is a sham, I would say they unfurlough the workers, because they have already decided to give them back pay and if they are furloughed too long (think one month), then it would look ridiculous.
The Republicans said they would not give money to people who didn't work (when Obama's stimulus package passed), but it would seem that if the furloughed workers receive backpay that proves to be a lie. They seem to agree that the government workers should be getting paid for their extra week of vacation. I guess Republicans want their government workers tied to the Military Industrial Complex paid..
President Pakalolo choking chicken at choke points with Reggie at B-school.
Treasury is bringing in $250 BILLION PER MONTH in Tax Revenue.
Our bill per month to cover all interest costs is $20 BILLION
It's all Kabuki....all the "default" talk...The "Full Faith and Credit Act" orders the President pay the interest...it's all a Game, which most of you here understand
250 billion per month? 250x12=3,000 So we hve three trillion in tax revenue coming in? Especially, now that many revenue generating arms of government (like the hotels that pay taxes in National Parks) are closed? Try again or
Pass the unicorns and the skittles they are shitting...
I agree, kabuki theater, but no way your numbers are correct, especially with interest rates rising. Now about those liabilities (SNAP unemployment etc,), are they going up or down?
income varies greatly month to month, but since it was the end of a quater, the Tax revenue is higher.
NOPE - those numbers are correct...simple Google search will show this
Here's one: http://www.usgovernmentrevenue.com/fed_revenue_2013US
$2.7 TRILLION in Direct Revenue for 2013
In fact: April of this year brought in a record of $406.7 BILLION for 1 month!!!
http://www.fms.treas.gov/mts/mts0413.pdf
Okay, everything is contained then. now tell me why the fuck we doing this;
http://www.newyorkfed.org/markets/tot_operation_schedule.html
In part because of a 2013 outlay of $2,893 billion......... for a deficit of $606 Billion to July 2013
http://www.cbo.gov/sites/default/files/cbofiles/attachments/44495-MBR.pdf
20 billion interest 240 billion p.a. on 16 trillion debt.. he's dreaming
3 reposts from another thread. Lord Maximus is correct (given the caveat(s) below), and look to be more current that the numbers I used.
.....
Gross interest payments are 7% of revenue. Net interest payments, taking into account Fed interest rebates, are a little more than 4% of revenue. As a % of expenditures, gross and net interest payments are 5.8% and 3.4%.
.....
Numbers I gave were mostly 2012 figures, so since interest rates have increased a little, the percentages would be higher in 2013 due to debt rollover, all other things being equal.
Variables I used were FYOINT, FGRECPT, FGEXPND in the Fed FRED database.
Federal Reserve interest rebate figure came from the NY Times and is a 2012 figure also: www.nytimes.com/2013/01/11/business/economy/feds-2012-profit-was-88-9-bi...
.....
FYI, the Fed FRED interest number I was using (FYOINT) doesn't count interest accruing but not paid to the SS Trust fund, ie, intra-governmental debt.
Also, most interest paid to the Fed gets refunded to the Treasury, and interest isn't paid on currency and coins, so that was subtracted from gross interest to get a net figure.
So the $17 trillion figure gets reduced to $12 trillion when you consider only debt held by the public. Then it gets reduced by approx another $3.5 trillion when you take into account Fed purchases of debt, leaving a net debt of "only" about $8.5 trillion that interest is paid on.
http://www.treasurydirect.gov/govt/charts/principal/principal_govpub.htm
http://research.stlouisfed.org/fred2/series/BASE
So why would China say that we need to increase the debt ceiling? Why don't the Republicans tout this number and say the chance of default is "minuscule" to shut the Democrats up? Something does not seem right. It's too good to be true.
Where's the rub? The US could afford more than 20 billion in interest payments a month. More debt, more growth, higher revenues.
Maybe the numbers you're quoting and being reported are not genuinely true and the real sorry state of sad affairs is known to the jackasses in charge.
The Fed is nearly the sole buyer of US debt and keeps the lights on, keeps the ponzi going. Isn't that a quasi default on debt already? When the ponzi masters ran out of idiots to buy their shit and sign up new candidates, all they can do is buy their own shit and pretend they're in great shape.
Something is going on that we're not yet aware of.
Possible answer to you and Bobbyrib - prioritization of payments as discussed on ZH. I agree with your statement that something could be going on behind the scenes that is not being discussed.
10-04
http://www.zerohedge.com/news/2013-10-04/what-if-we-go-past-x-date
10-07
http://www.zerohedge.com/news/2013-10-07/prioritization-payments-would-t...
So pass a Constitutional amendment..
you forgot the <sarc> lol
Well, one thing's for sure. If everything is "fine", why is the 85 billion per month still being monetized...
http://www.newyorkfed.org/markets/tot_operation_schedule.html
I took a little different approach then you did... I went to Congressional Budget office for the data... part of issue is understanding the difference between Discretionary Spending and Mandatory Spending...
The long and short of it is that the only aspects of the government that is shut down is PART OF THE DISCRETIONARY aspects of the government..
Looking at the 2012 budget the Total Outlays were $3,538 billion, Total Revenue for 2012 - $2,449 B a short fall of $1,089 Billion that was added to the deficit.
OF THE OUTLAYS....
$1,285 B is Discretionary.... made up of Defense and Non Defense
$670 B in Defense
$615 B in Non Defense (this is THE ONLY part of spending they are fighting over.. and ONLY PART OF THIS LINE ITEM is what they are getting into a pissing match over..)
The balance of the $3,538 minus Discretionary spending of $1,285 B, or $2,239 B is what is called Mandatory spending... which includes
$767 B in Social Security
$551 B in Medicare
$250 B in Medicaid
$343 B in Income Security
$143 B in Retirement and Disability
$173 B in Other ??????
$-209 B in Offsetting Receipts
$222 B in Interest
I put together a "back of the napkin" spread sheet in excel (you can copy the data directly from the site below into a spreadsheet) to compare 1998 to 2007 to 2012 to see where the F.... money has gone and also to compare the revenue taken in.... I wanted to understand the cash flow from 1997 (budget surplus) to today... to see if a change in any line item jumped out at me like for example Medicare or Defense.. and it was a very interesting discovery... the increases in spending appear to be across the board..... in every line item... I wish I could share the spread sheet because it was not what I expected!! And not what the Lame Stream Media leads you to believe with all the hype.... here is the link to the web site with the raw data you can make your own..
http://www.cbo.gov/sites/default/files/cbofiles/attachments/43904-Histor...
This shit has to stop!!!!!!
Thank you for relaying this information in such a clear and concise fashion.
It's appreciated.
$2.9 trillion income annually, 3.8 trillion outlays for fed govt.
240 billion in interest can come from axing homeland security 55 billion
agriculture 140 billion, & national intelligence 50... and while we're at it, state department
by the way - 1-1.4 trillion dollars is budgeted annually for defense related spending-including interest on past military debt + homeland security + nasa satellites + veterans benefits + DoE military projects + FBI counterterroism + national security.
The coffers of the Treasury are infinite.
If the FED can shower Wall Street with $85 Billion per month, why not the Treasury?
I really don't know why they even keep their books anymore, other than to employ accountants and tradition.
Unless the debt ceiling is raised, the Fed will have no debt to buy.
Which is fine if you had organic growth, the backbone of Keynes. But when debt is created to piss money away run-away healthcare costs, it doesn't make sense.
"I really don't know why they even keep their books anymore..."
A barbarous tradition.
Default this motherfucker.
Two words for all the stupid assholes who either invested in the debt
used to pay off the stupid asshole bankers stupid bets & bonuses or believed the
stupid asshole politicians promises ---- FUCK YOU ----
I prefer the term "bottleneck". "Choke point" sounds painful and, besides, I can piss through a bottleneck.
For the life of me I cannot understand why Obama agreed to recall 400,000 pentagon staff. We can expect that other agencies will be making the same request, thereby effectively nullifying the shutdown and relieving pressure on Boehner to stop the bullshit.