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Goldman Fears "Government Shutdown" Is Looming As Lew Urges Congress "Raise Debt Limit ASAP"
With Treasury Secretary Jack Lew sending a letter to Congress this evening demanding they raise the debt limit as soon as possible, warning that cash balances have dropped below the "minimum target," it is perhaps less than surprising that Goldman Sachs is warning that a government shutdown at the end of the month has become much more likely over the last several weeks. While out-months in VIX (beyond the prospective shutdown) remain elevated, Goldman finds a silver-lining claiming that the effect of a potential shutdown on financial markets and the real economy would probably be modest if it did occur. We shall see...
As Goldman explains...
- While it is a close call, we still think it is slightly more likely that Congress will avoid a shutdown and pass spending legislation just before the current funding expires on September 30.
- More importantly, while the risk of a shutdown is real and the outcome of the political debate is hard to predict, the effect of a potential shutdown on financial markets and the real economy would probably be modest if it did occur. Unlike 2013, a shutdown in October would be unrelated to raising the debt limit, and it would probably also be shorter in duration. If so, it would probably have little effect on output or personal income, though it could dent confidence.
A government shutdown at the end of the month has become much more likely over the last several weeks, in our view. Federal spending authority expires on September 30, and with little hope of resolving differences on full-year spending bills by then, Congress will need to pass a “continuing resolution” to avoid a lapse in funding that would result in a partial government shutdown.
While the parties have disagreed on 2016 spending levels for some time, a shutdown only recently emerged as a risk, mainly because the controversy surrounding whether to block funds to the Planned Parenthood organization has created the sort of binary issue that has caused or threatened to cause shutdowns in the past. Some Republicans want to use the upcoming spending bill to block the organization from receiving federal funds, while Democrats generally oppose such a move. Unlike budget disagreements, which can be settled by meeting halfway, these issues are harder to resolve because one side basically needs to give up on their position.
More generally, the political environment at the moment seems ripe for fiscal conflict. We are still closer to the last election than the next one, and it is not a coincidence that recent major fiscal disruptions occurred in 2011 and 2013—odd years—when upcoming elections were still more than a year off. In the 2013 experience, public sentiment toward Republicans dropped sharply during and after the shutdown (Gallup’s Republican favorability measure hit a 20-year low), but a year later Republicans won the majorities in the House and Senate. Some lawmakers may conclude from this that voters’ memories are short and the political price for a shutdown more than a year before the next election is low. Anti-establishment political sentiment is also running high; “outsider” candidates are performing surprisingly well in the contest for the Republican and, to a lesser extent, Democratic nomination, and efforts to remove House Speaker Boehner (R-OH) from his position as Speaker have resurfaced.
Ultimately, the outlook hinges on House Republican leaders. In the next week or two, the House looks likely to pass a continuing resolution that defunds Planned Parenthood. The Senate already considered legislation dealing with that topic and failed to muster 60 votes, suggesting that only a “clean” funding bill can pass there. As has been the case several times before, this will put House leaders in the position of accepting a “clean” bill that the Senate will eventually pass, thereby averting a shutdown, or insisting on their version, which the President would surely veto in any case.
There is more than one way that Congress could still avoid a shutdown at the end of the month. The most obvious option would be for House Republican leaders to bring “clean” spending legislation to a vote, with the expectation that it would pass with substantial Democratic support. To satisfy conservatives, the House could also vote on separate legislation to enact the specific policy changes some lawmakers are demanding, potentially via the reconciliation process, which requires only 51 votes in the Senate and therefore would allow congressional Republicans to send such a bill to the President’s desk (it would nevertheless be vetoed, but the effort might be enough to satisfy House conservatives). A second option would be to split off the controversial issues from the funding for other agencies, limiting the scope of any potential shutdown, similar to the strategy used in late 2014 to extend spending authority in the face of Republican opposition to the President’s executive action on immigration. However, it seems unlikely that congressional Democrats would support such a move this time around.
So will a shutdown occur? With a few weeks to go until the deadline, the outlook is very murky but our best guess is that Congress will narrowly avoid it. While there are several considerations that make a shutdown possible, as noted above, support for the current effort is still fairly limited. Prior to the 2013 shutdown, for example, 80 House Republicans signed on to the effort to oppose spending legislation unless it blocked funding for the Affordable Care Act (ACA, or Obamacare). By contrast, only around 30 have signed on to the current effort, though that number may rise.
More importantly, while the probability of a shutdown of some kind seems to us to be approaching 50%, we think the probability of a shutdown that has a significant effect on the financial markets or real economy is much lower, for two reasons.
First, unlike the 2013 shutdown, which coincided with the deadline to raise the debt limit, the next deadline to raise the debt limit is unlikely to be reached until at least mid-November. As shown in Exhibit 1, shutdowns that overlapped with debt limit deadlines—the 1990 and 2013 shutdowns—have tended to result in a stronger reaction in financial markets than other shutdowns where the debt limit deadline was not about to be reached.
Exhibit 1: Shutdowns create volatility mainly when they overlap with a debt limit deadline
Source: Bloomberg, Congressional Research Service, Goldman Sachs Global Investment Research
Second, a potential shutdown would probably be very short. In 2013, the shutdown ended up lasting longer than initially expected, in large part because the only natural deadline was the debt limit deadline, which was 2.5 weeks after funding lapsed. While one might argue that the lack of any deadline could lead to an even longer potential shutdown this year, it is more likely in our view that it would simply result in a decision to end the shutdown soon after it began, as has been the case with nearly every other government shutdown. In the 12 instances since 1980 that the federal government has shut down due to a funding lapse, the shutdown has lasted more than a week only twice. In 2013, we estimated that each week that all agencies were shut down would reduce real GDP growth in the quarter by around 0.2pp, though most of this effect would be reversed in the following quarter (after the first week, most civilian defense employees returned to work, reducing the economic effect of the final two weeks of what turned out to be a three-week shutdown).
It is too early to predict with any certainty whether a shutdown will occur, let alone how long it might last, but as the situation stands today, it seems likely to us that if a shutdown does occur it would have a smaller effect than the one in 2013.
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THESE CRIMINAL FUCKS ALL NEED TO DIE - IMMEDIATELY.
So tired of this Bukkaki theater.
puppetry of the penis heads
What is this debt limit they speak of?
Janet and Jacob Joseph just hold down their zero keys for a moment or two each month and all is well.
Laws are so 20th Century.
Teh only government shutdown you will see is once teh market enforces it... ie, hyperinflation.
Hang the fascist fucks.
For all intents and purposes the Government has been shut down going on half a century
Even with 175 days of US Debt being frozen and Jacob is still bleating to Congress? The PPT must be running out of other people's money, so time to ramp up the presses, again...
It has been operating illegally for 102 years, really.
Relax. The debt limit will be increased and the government will not shut down.
If Vegas is taking bets on either of these propositions, please let me know.
'Taxes for Revenue are Obsolete'
http://www.constitution.org/tax/us-ic/cmt/ruml_obsolete.pdf
Why have a debt ceiling at all? Or file 1040s for that matter.
According to Ruml, in January 1946, print everything you need.
Debt ceilings and 1040's are necessary to help perpetuate the fraud.
At least Bukkaki has a "happy ending". This real life one wont end well.
We can only hope that this ending will be highlighted by ritual Seppuku by the numpties in charge, but I'm not holding my breath...
In Nagasaki...
https://www.youtube.com/watch?v=Y3QXK2iUJn0
Exit paradigm. Withdraw belief. Government = Corporation. And so are you if you have a legal name. Quote attributed to Mussolini still makes sense: Merger of State and Corps is Fascism. Prepare accordingly.
The UNITED STATES is a CORPORATION -- Sofia Smallstorm
https://www.youtube.com/watch?v=4EociRmeDZw
Great doco:
The Corporation
https://www.youtube.com/watch?v=Y888wVY5hzw
Your Legal Name manacle:
servantking.info/
https://kateofgaia.wordpress.com/
Precisely. There is no debt limit, not when they can hand Wall Street $79 Billion/month for a year.
And bail out utterly failed and corrupt banks/insurers/corporations on the backs of families.
Hang 'em high!
OK...everybody all at once:
"Raise the interest rate"
"Shut it DOWN"
"Raise the interest rate"
"Shut it DOWN"
"Raise the interest rate"
"Shut it DOWN"
More blah, blah, blah, blah. More distraction for the masses. More campaign and party contributions from the suckers. More unrelenting hours of "what if" scary discussions in the media to rivet the sheeple's attention.
Masses? I bet you 95% of them know nothing of this.
It'll be all over the corporate mainstream media very soon, so even the sheep who spend hours a day gorging on fantasy football, TMZ, and Ow! My Balls! re-runs will be able to flip over for a second and download a quick "opinion" on the topic. Easily obtained, externally constructed, low-information opinions are critical to the sheep who still believe that participation in the corporatocracy's quadrennial voting ritual is proof of a vibrant democracy... the greatest in world history, of course.
Didnt these fuck nuts just get back from a long vacation? With something like the debt limit looming, you would figure they would put that ahead of a vacation. I have some recommendations...CUT FUCKING SPENDING! END FUCKING DEPARTMENTS! FIRE GOVERNMENT WORKERS!
Good. Shut it down.
yes, when it is all said and done the proles may discover what the secret sauce is; namely, we don't need this government.
"This is not the government you were looking for, move along, move along."
Why would the House worry about the Senate's "clean" spending bill when constitutionally, all spending legislation must originate in the House? However, never expect Boehner to stand up for the rights of the people if there is something in it for him.
Like a couple of bottles of Merlot.
The Republican leadership already said they'll cave on this like everything else. They pass some meaningless shit showing "disabppoval" and then try to tell the base they just didn't have the votes.
Failure Theater.
Yet again....and again.
Did you know that Manchin, a Dem Senator, has a much more conservative record than any of the female R senators?
Shut that shit down leave that corrupt shit shut down, nuter every single mother fucker living off taxes collected at gun point. Last but not least fuck the corrupt facist administration lead by Reggie's ass bitch..
Shut the MoFo down. Society does not need the US Federal Government to survive and thrive.
In fact, Fed.gov interests are often directly opposed to those of a peaceful, prosoperous society
Have you forgotten that there are two governments in the United States? The Federal one which collects taxes on income and the financial one which collects taxes through interest.
Maybe you are right and you will be much safer once money votes and Dimon or Blankfein are president. After all, they run on campaigns of not slaying muppets.
Good god man, stop parroting those morons Ted Cruz and Rand Paul...
...and the financial one which collects interest and profits through the inflation of counterfeiting.
"Have you forgotten that there are two governments in the United States? The Federal one which collects taxes on income and the financial one which collects taxes through interest."
Good god man, stop parroting those morons Lenin and Marx...and your Islamic masters
Those that understand interest, earn it. Those that don't, pay it!
Bastiat on what is capital:
http://praxeology.net/FB-PJP-DOI-II-2.htm
Those that understand capital, value it. Those that don't, counterfeit it.
Please do not tell me that you believe interest on fictitious or inter-generational capital is earned....
Tho the voters are in no mood for bull shit. china holds the cards there. They let thier currency float if they fuck up this time, sooner that is. They will anyway
OMG! NOT MOAR AUSTERITY! THEY'RE TRYING TO KILL US ALL!!!
Dear gawd, think of the childrens debt inheritance!
Wait, wut?
Someone get Boehner out of his tanning crypt. We are going to need him to go against what everyone wants again.
Who'd a thunk you could turn being an orange, alcoholic traitor into a well paying career?
Actually, last I heard, Boner, err i mean Boehner, was caught in a closet in the WH with a very high ranking male public official, and there may have been a stained blue dress involved...
Are we going to see another paid vacation for federal employees?
This is ridiculous ...
Just cast the $1 trillion dollar platinum coin already - SCUM BAGS!
Jack Lew sucks Paul Krugman's cock.
https://www.youtube.com/watch?v=4lSWUBh04pk
I thought Congress turned on the auto-expand feature for the national debt about two years ago, another ceding of their constitutional duties to the executive. Is that not the case?
http://dailysignal.com/2011/07/12/senantor-mitch-mcconnells-debt-ceiling-plan/
OK, so it was 2011 and it only applied for the year and it never passed. Huh. But then why ... oh never mind.
They made everyone think so because their stock investments were plummeting in value.
Aside from the couriers that deliver the cash envelopes, no one has actually done any work in D.C. for a long long time.
Everybody that is not getting a Fed or a Fed subsidised income has their fingers crossed.
Yes but we can afford 50 million more illegal aliens.
Extenuating circumstances running low Mitch the turtle Mc Connell?
Mr. Senate [ No Show]
Mr. Boehner, how's your reclusive life treating you?
Free John Corzine
These (2) cockroaches are going to ask for a debt ceiling increase, and also excess reserves to push the total reported debt of the United States above 19 trillion dollars.
This figure does NOT include unfunded liabilites.
War is coming Bitchez.
Honestly, at this point, if the GOP doesn't grow a pair, I am voting for Trump. Can't be worse than we have now.
Shut it down 4 EVA!
I think they should just print more money....I need my EBT card. question: what was the article today from alan greenspan?
Is this going to be a real shutdown or another two week paid vacation? Fuck em. Remove your consent build guillotines and prepare.
There has never been a "shut-down"; that is us falling for the propaganda phrase. The correct phrase would be "minimal and selective partial shut-down.
If we ever needed the services of a "do-nothing" Congress. now is clearly the time.
And we certainly have the perfect players on the stage.
any guess on who's going to be the first president/congress to vote on abolishing the joke of a debt limit? its all political jockeying at this point as no one wants to go on record as being the one that flushed the toilet on the US debt fueled fiat ponzi scheme. instead they'll get boiled like frogs slowly and can go down with everyone else.
Is it my imagination, or do they threaten this on a pretty regular schedule? It is just like a page right out of Brave New World or 1984. Would we even notice or care if they shut down and went home? What would O'llama do, play more golf, do a speaking tour of gay bath houses?
What we *should* do is send every last 'gub'mint cheese bloated' worker an email and say something like, "hey, you guys have been working too hard, and to show our appreciation, we want you all to go home for a two week paid vacation, on us!" Then while they are gone, go in and change all of the locks. They should be cool with that, because if I am not mistaken, *they all work for us*, at our pleasure, and lately, not so much.... just sayin...
Only if you want to visit a national park or veterans wall does it interfere with your life. Of course, Obama did that on purpose and ruined many people's vacation even though the portion of the overall budget is negligible. That is what one who practices evil for his life's work does.
"In the 12 instances since 1980 that the federal government has shut down due to a funding lapse" - why is the USD still the world's reserve currency when its government is clearly and continually inept?
The reason the debt ceiling has been locked for 200 days is that during times of fiscal crisis excess reserves are appropriated to pay the bills.
Congress has been using this provision, completely out of context, to open funds for .gov payouts.
The Obunga administration has been asking for a change that requires no congressional approval for debt ceiling increases..
We're seriously becoming a banana republic.
Lew has been cooking the books to manipulate the excess reserves all year long to stay under the ceiling.
Given the PPT mandates; I have no doubt you are correct.
Secrets Of The
Plunge Protection Team
The Four Derivative US Dictators
http://www.rense.com/general52/secretsoftheplunge.htm
Interesting timing if all the politicians were to leave town and then a market meltdown happened, or worse a flase flag event.
Shutdown? What about you cut the fucking deficit to 0 overnight?
so unless the quasi wars in Ukraine and Syria suddenly upped the cost for them, what else could possibly lead to running out of funny-money fast enough to bring out the old "lift the debt ceiling or chaos ensues" mantra again???
PPT blow it's entire wad on 24/25 August or what?
Russia may take the proxy out of proxy-war in Syria. I'll bet Assad is very glad to see Putin.
Nah, lets try it for a while without the Federal government. Lincoln was wrong.
The monthly payment on a trillion in debt at 0.01% interest is:
A measly 8.3 million bucks.
ZIRP means that a "Rolling Loan Gathers No Loss" with near frictionless efficiency.
What, payoff the principal? You must be joking. All politicians have a Green Light to promising and deficit creation. Spend like there is no tomorrow, for tomorrow never comes!! Only today counts!
Only the SHADOW knows. The FED and minions are now digitally printing a trillion dollars per day to keep this system propped up; yes I said a trillion per day to stabilize the oil patch unwinding and since it is at least 20% of the derivative or highly leveraged debt market, which is said to be in the quadrillions, then it becomes clear how a trillion of back-door QE per day is necessary & is being used as I speak.
On the PPT; know when it was created, its goals and how it is used and by whom leads it.
http://www.rense.com/general52/secretsoftheplunge.htm
Did anyone know there was a "debt limit"; let's pull the curtain behind the FED and see if this is true!
Children always speak to others like children; however so many are so blind in so many ways to the truth. Truth is an illusive thing.
"Close call..." LOL that was good one ;)
Of course they will raise it, its not even discussion. If they will create any "heat" its only to fake the world that they actually care about it. Otherwise dumb world would dump dumb $ already.
Shut it down, ground AFI, impeach 535 thieves + ICiC for treason, fraud
Everyone already knows its game over for the dollar.
Make the limit unlimited already so the American people dont have to deal with meaningless headlines about how they may or may not increase the debt limit that will be increased regardless, the clowns in D.C. are not going to ever vote NOT to pay themselves with your money, to think they would do so for any prolonged period of time is idiotic, we are dealing with politicians here, not saints.
Shut it down. Who gives a shit. Name one fucking thing our govt does for us that necessitates them nneding to be "open". They dont produce anything, dont protect us, dont defend our borders, dont enforce legitimate laws passed by our congress when it actually was once a representative body of the American people. So, why have it open. Shut the fucker down like an old days inn hotel and let the fucking indians run it.