President Obama

When the Republican party agreed last week to a push back on the debt ceiling discussion by three months to May 19, virtually without a fight in a move that may presage what is set to become a quarterly can kicking exercise on the US credit card max, some were curious what the quo to this particular quid may be. Earlier today on Meet the press Paul Ryan explained: the pound of spending flesh demanded by the GOP in exchange for caving on yet another key GOP hurdle is, as our readers have known for over two weeks, the Sequester, which is set to hit on March 1 and possibly the stop-gap government funding on March 27, after which various government agencies will start shutting down. Both programs are set to kick in automatically as incremental spending cuts, chopping away even more basis points from the 2013 US GDP, unless the GOP votes affirmatively to extend them in what would then be seen as a move that destroys any last trace of leverage and credibility that GOP may have had.

“Those are my principles,” Marx said.  “And if you don't like them... well, I have others.”

With eight months left until million of Americans are supposed to begin shopping at online markets created by the Obamacare 'tax' law, the insurance industry is concerned at the government's lack of readiness. Bloomberg reports that Jim Donelon, the head of the National Association of Insurance Commissioners, suggested that President Obama may need to delay the implementation of the health-care overhaul or "risk chaos" when the subsidized plans go on sale later this year. While it is clear that the administration has shown no sign of seeking a delay, Donelon notes that "...to rush into implementation before it's ready would not be in the President's best interest."

• When the cash runs out: Nokia to Omit Dividend for First Time in 143 Years (BBG)
• Passing Debt Bill, GOP Pledges End to Deficits (WSJ)
• Japan logs record trade gap in 2012 as exports struggle (Reuters)
• so naturally... Yen at 100 Per Dollar Endorsed by Japan Government’s Nishimura (BBG)
• Japan rejects currency war fears (FT)
• In Amenas attack brings global jihad home to Algeria (Reuters)
• Investors grow cagey as Italy election nears (Reuters)
• Mafia Victim’s Son Holds Key to Bersani Winning Key Region (BBG)
• Bernanke Seen Pressing On With Stimulus Amid Debate on QE (BBG)
• U.S. to lift ban on women in front-line combat jobs (Reuters)
• Red flags revealed in filings of firm linked to Caterpillar fraud (Reuters)
• Apple Sales Gain Slowest Since ’09 as Competition Climbs (BBG)
• Spanish Jobless Rate Hits Record After Rajoy’s First Year (BBG)
• North Korea Threatens Nuclear Test to Derail U.S. Policies (BBG)

MARTIN SMITH: Is that really the job of a prosecutor, to worry about anything other than simply pursuing justice?

LANNY BREUER: Well, I think I am pursuing justice. And I think the entire responsibility of the department is to pursue justice. But in any given case, I think I and prosecutors around the country, being responsible, should speak to regulators, should speak to experts, because if I bring a case against institution A, and as a result of bringing that case, there’s some huge economic effect — if it creates a ripple effect so that suddenly, counterparties and other financial institutions or other companies that had nothing to do with this are affected badly — it’s a factor we need to know and understand.

• Doubt Greets Bank of Japan's Easing Shift (WSJ)
• Japan hits back at currency critics (FT)
• Japan upgrades economic view for first time in eight months (Australian) - only to lower them in a few months again
• GOP critics get opportunity to grill Secretary Clinton on Benghazi (Hill)
• Global economy set for ‘slow recovery’ (FT)
• Obama to back short debt limit extension (FT)
• Unfinished Luxury Tower Is Stark Reminder of Las Vegas’s Economic Reversal (NYT)
• Draghi Says ‘Darkest Clouds’ Over Europe Have Subsided (BBG)
• High-Speed Dustup Hits a Clubby Corner (WSJ)
• U.S. Budget Discord Is Top Threat to Global Economy in Poll (BBG)
• Sir Mervyn King says abandoning inflation target would be 'irresponsible' (Telegraph)
• Spain Says It May Cover 13% of 2013 Funding in January (BBG)

Gold edged up and Tokyo gold hit a record multiyear high after the Bank of Japan announced a bold, some would say reckless, $117 billion ‘stimulus’ program as expected. The BOJ’ package included doubling its inflation target to 2% and making an open-ended commitment to asset purchases from next year.

This open ended policy surprised some that expected a small rise in the BOJ's $1.1 trillion asset-buying and lending program.

On Wednesday, there is a scheduled vote in the U.S. Congress proposed by Republicans on the U.S. borrowing limit.

If governments or central banks really can create wealth simply by creating money, why does poverty exist anywhere on earth?  Why haven’t successive rounds of quantitative easing by the US Fed solved our economic recession?  And if Fed money creation really works, and doesn’t create inflation, why haven’t Americans gotten richer as the money supply has grown? The truth is obvious to everyone.  Fiat currency is not wealth, and the creation of more fiat dollars does not mean that more rice, steel, soybeans, Ipads, or Honda Accords suddenly come into existence. The creation of new fiat currency simply strengthens a fantasy balance sheet, either by adding to cash reserves or servicing debt.  But this balance sheet wealth is an illusion, just as the notion we can continue to raise the debt limit and borrow money forever is an illusion. 

It’s all a money game on Wall Street.

“Here we go again”

Today, Jeff Currie, Goldman Sachs chief commodity strategist said he wouldn’t be surprised if we woke up in summer with $150 oil. Well, I would, and here is why.

The following is a list, provided by the White House, of executive actions President Obama plans to take to address gun violence.

From Goldman Sachs: "Allowing the sequester to hit would, in our view, have greater implications for growth than a short-lived government shutdown, but would not be as severe as a failure to raise the debt limit. Although Republicans in Congress generally support replacing the defense portion of the sequester with cuts in other areas, there is much less Republican support for delaying them without offsetting the increased spending that would result." And in bottom line terms: "Sequestration would reduce the level of spending authority by $85bn in fiscal year (FY) 2013 and $109bn for subsequent fiscal years through 2021. The actual effect on spending in calendar 2013 would be smaller--around $53bn, or 0.3% of GDP--since reductions in spending authority reduce actual spending with a lag. The reduction in spending would occur fairly quickly; the change would  be concentrated in Q2 and particularly Q3 and could weigh on growth by 0.5pp to 1.0pp." In other words: payroll tax eliminates some 1.5% of 2013 GDP growth; on the other side the sequester cuts another 1%: that's a total of 2.5%. So: is the US now almost certainly looking at a recession when all the fiscal components to "growth" are eliminated? And what will the Fed do when it is already easing on "full blast" just to keep US growth barely above 0%?

We are on the same path as Greece, and Mr. President, you need to recognize that being a true leader is not doing the popular thing but the right thing with regard to fiscal responsibility.

Following up on today's relentless debt ceiling propaganda, which started with the Politico report that more than half of republicans are willing to push the US into a "temporary" default, going through Obama's "We are not a deadbeat nation", but one whose president apparently will not debate the debt ceiling (the same president who as a Senator was against rising the debt ceiling) and closing with Boehner's rebuttal to Obama, saying the GOP would raise the debt ceiling but in exchange for spending cuts, sure enough it was time to unleash the Treasury Secretary in his last days on the job, toting the party line ("extending borrowing authority does not increase government spending; it simply allows the Treasury to pay for expenditures Congress has previously approved") making it "abundantly clear" that "Even a temporary default with a brief interruption in payments that Congress subsequently restores would be terribly damaging, calling into question the willingness of Congress to uphold America’s longstanding commitment to meet the obligations of the nation in full and on time.  It should also be noted that default would increase our borrowing costs and damage economic growth and therefore add to future budget deficits, not decrease them." The unleashed Geithner then proceeds to threaten: "Threatening to undermine our creditworthiness is no less irresponsible than threatening to undermine the rule of law, and no more legitimate than any other common demand for ransom." Finally, Geithner also made it clear that the CNBC "RISE ABOVE THE DEBT CEILING" campaign is now at T-30 to T-45: "Treasury currently expects to exhaust these extraordinary measures between mid-February and early March of this year" which however should not be news to anyone.