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http://www.bbc.co.uk/news/world-us-canada-26021640

US Treasury Secretary Jack Lew has warned the US may default on its debt by the end of the month if Congress does not raise its borrowing limit.

Mr Lew said he could rely on emergency measures to pay US debts after the limit is reinstated on 7 February.

But he anticipated the treasury's reserves would quickly be exhausted as it issues annual income tax refunds.

Congress suspended the debt limit in October as part of a deal to reopen the federal government after a shutdown.

The $16.7tn (£10.2tn) cap will be reinstated on Friday.

More borrowing needed, looks like the Fed tapering might be coming to abrupt end?

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http://www.bbc.co.uk...canada-26021640

More borrowing needed, looks like the Fed tapering might be coming to abrupt end?

Sounds like my mate, had no money so kept borrowing on 0% credit cards, then using the borrowed money to pay back the others.....it worked for a while.

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http://uk.reuters.com/article/2014/02/04/uk-markets-global-idUKBRE9920LO20140204

World shares slumped to a near four-month low on Tuesday as signs the U.S. economy was stuttering compounded already frayed nerves following a sharp sell-off in emerging markets.

A weaker-than-expected report on U.S. factory activity hurt global equity markets and the dollar on Monday and left investors scurrying for traditional safe-haven assets such the U.S. and German government bonds and the Japanese yen.

It had been another torrid Asian session as traders returning from Lunar New Year holidays got up to pace with the sell-off and European markets looked in no mood to deviate from the downward course.

O dear, I'm sure there's no link between tapering and falling share prices. Just a stutter as the economy is recovering. In no way has QE created a bubble in shares.

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When to the Fed meet to agree these things. Is it like the first thursday of the month as with BoE?

Im very interested as to what they'll do this month. Whether they'll stick to a schedule as Denninger seems to think, or whether Schiff is right and they'll stop the taper.

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From the telegraph link:

Shocking US factory orders and Chinese bank woes trigger global flight to safety

“Absolutely awful” factory figures as new orders suffer worst slump since 1980 recession

They don't go into details but by "safety" they can't possibly mean the UK/London can they :o

The US Federal Reserve insists that America’s growth has reached "escape velocity"..

That might be the velocity but it's matterless if the trajectory is downwards.

Edited by billybong
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Unlike the stock market, the US economy is too big to be moved about by trivial QE sums. Like an oil tanker it has a huge inertial mass that takes time to accelerate in either direction. US GDP growth has been a more or less constant 1.5% p.a. since late 2009 - scandalously subpar given the scale of the stimulus it's received. I suspect that the US and world economies have been weakening for some time, disguised by various QE driven bubbles and unreliable data from China. That would certainly be consistent with the dollar's out-performance in recent months against a basket of currencies. December's factory orders preceded the worst of the bad weather but tally well with a 50% slump in the Baltic Dry Goods Index that's been seen since and the simultaneous collapse in the price of copper. Slowdown looks credible to me.

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http://www.bbc.co.uk/news/business-26136873

The new chair of the Federal Reserve, Janet Yellen, has said the bank will continue to cut its stimulus measures for the US economy.

If the US economy keeps improving, the bank would take "further measured steps" to reduce its support, she said.

In her first comments since taking over, Ms Yellen also signalled that interest rates would remain low.

Her testimony was released ahead of a House of Representatives committee hearing later.

Ms Yellen noted the recent volatility in global financial markets, but said that at this stage it did not "not pose a substantial risk to the US economic outlook".

She emphasised continuity in the Fed's approach to policy, saying she strongly supported the approach driven by her predecessor, Ben Bernanke.

There had been an improvement in the US jobs market, she noted, but said that the recovery was "far from complete".

While the US jobless rate has fallen, it still remains "well above levels" the Fed sees as consistent with maximum sustainable employment, she said.

Until the next panic when it will be all hands to the printer.

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January Fed minutes show officials debated raising interest rates

The Fed had previously suggested any rise in interest rates would be linked to the unemployment rate falling below 6.5%. Last month unemployment dipped to 6.6%, but problems remain in the jobs market. The percentage of people no longer seeking work is at 30-year highs. Long-term and youth unemployment are also high, as are the jobless rates for African Americans and hispanics.

The Fed open markets committee (FOMC) minutes show the central bank is now assessing what to do when unemployment hits its former target.

“Participants agreed that, with the unemployment rate approaching 6.5%, it would soon be appropriate for the Committee to change its forward guidance in order to provide information about its decisions regarding the federal funds rate after that threshold was crossed,” the minutes state. The Fed was not specific about what those changes would be.

Ah, forward guidance. Sounds familiar.

December’s disappointing jobs figures did not deter the Fed’s decision to cut back on its quantitative easing (QE) economic stimulus programme. QE is currently pumping $65bn a month into the bond markets, in an attempt to keep down interest rates and encourage investment. The rate was cut by $10bn after January’s meeting.

“Several participants argued that, in the absence of an appreciable change in the economic outlook, there should be a clear presumption in favour of continuing to reduce the pace of purchases by a total of $10bn at each FOMC meeting,” the minutes said.

Paul Ashworth, chief US economist at Capital Economics, said: “It will be harder for the FOMC to ignore the run of weaker incoming economic data at the next meeting in March.

“Nevertheless, we think it will continue with the taper anyway. Only if the weaker data continued into the spring, when it would be harder to blame the weather, would we expect the FOMC to consider putting the taper on hold.”

Tapertastic

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January Fed minutes show officials debated raising interest rates

Ah, forward guidance. Sounds familiar.

Tapertastic

http://www.nytimes.com/2014/02/03/business/the-middle-class-is-steadily-eroding-just-ask-the-business-world.html?_r=0

In Manhattan, the upscale clothing retailer Barneys will replace the bankrupt discounter Loehmann’s, whose Chelsea store closes in a few weeks. Across the country, Olive Garden and Red Lobster restaurants are struggling, while fine-dining chains like Capital Grille are thriving. And at General Electric, the increase in demand for high-end dishwashers and refrigerators dwarfs sales growth of mass-market models.

As politicians and pundits in Washington continue to spar over whether economic inequality is in fact deepening, in corporate America there really is no debate at all. The post-recession reality is that the customer base for businesses that appeal to the middle class is shrinking as the top tier pulls even further away.

It would appear that perhaps even if the US is creating jobs its the wrong type of jobs that are lower waged. Hence no "recovery". However no one is wanting to admit this inconvenient truth.

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http://www.reuters.com/article/2014/02/18/us-usa-wage-cbo-idUSBREA1H1VE20140218

Raising the U.S. minimum wage would lead to the loss of about half a million jobs by late 2016 but lift almost a million Americans out of poverty, the Congressional Budget Office forecast in a report on Tuesday that reignited debate over one of President Barack Obama's top priorities this year.

Buoyed by polls showing three-quarters of Americans in favor of a minimum wage hike, Obama and his fellow Democrats advocate raising the minimum hourly wage to $10.10 from the current $7.25 in a move to boost the stagnant wages of millions of low-income workers.

In the long term, Democrats also want to tie future minimum wage increases to inflation, avoiding the legislative fights over wages for lower-paying jobs.

So possible no net gain?

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http://blogs.reuters.com/data-dive/2014/02/12/americas-disappearing-middle-skill-jobs-and-falling-wages/

There are a lot of things that “explain” inequality. Technology, finance, societal, and cultural changes have all played their part. In this series, Counterparties takes a look at the various things that correlate with rising income inequality in order to ascertain how we got to this economy and where we might go from here.

America is losing middle class jobs — and middle class pay. Not only are “middle-skill” jobs disappearing as routine tasks become computerized (think everything people do in the television show “The Office”), but that job loss has contributed to stagnating wages, according to a recent paper by Michael Boehm of the University of Bonn.

This chart shows the changes in US employment shares by type of occupation since the end of the 1980s. The paper used two different measures, the National Longitudinal Survey of Youth (NLSY) and the comparable years and age group in the more standard Current Population Survey (CPS):

middle-skill-workers.png

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http://www.nytimes.com/2014/02/21/us/public-sector-cuts-part-time-shifts-to-duck-insurance-law.html?ref=business

WASHINGTON — Cities, counties, public schools and community colleges around the country have limited or reduced the work hours of part-time employees to avoid having to provide them with health insurance under the Affordable Care Act, state and local officials say.

The cuts to public sector employment, which has failed to rebound since the recession, could serve as a powerful political weapon for Republican critics of the health care law, who claim that it is creating a drain on the economy.

President Obama has twice delayed enforcement of the health care law’s employer mandate, which would subject larger employers to tax penalties if they do not offer insurance coverage to employees who work at least 30 hours a week, on average. But many public employers have already adopted policies, laws or regulations to make sure workers stay under that threshold.

And conversely giving them less money to spend in the economy and forcing them to fund their own health care?

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I havent any charts to prove it but I suspect in order to pay for higher minumum wages here in the UK the distribution of income at the lower end has 'flattened' somewhat since 1998...those at the top havent paid for it, thats for sure, so most likely those on £15,000-25,000 have seen stagnant wages. No free lunch, anyway. Indeed, we hear a lot of the 'squeezed middle' while those at the bottom have seen a somewhat improved income, and those at the top made like bandits.

On a practical level, im rather ambivalent about the mininum wage. I doubt it harms, or either boosts the economy.

On a principle level, it disgusts me. The idea that the government can forcefully prohibit me from working for £6ph even if I consent to it is abhorrent. My body. My labour.

Edited by Executive Sadman
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http://www.theguardian.com/business/2014/feb/21/fed-transcript-2008-financial-crisis-yellen-bernanke

The Federal Reserve on Friday released transcripts of the meetings it held in 2008 as the central bank tackled the worst financial crisis in living memory and the US teetered on the edge of another Great Depression.

The transcripts of 14 scheduled and emergency policy meetings the Fed held cover only official meetings and not the countless telephone calls and unofficial gatherings of senior policy officials and financiers held during the crisis.

They give some of the clearest insight yet into how officials tackled the crisis. They also shine more light on the record and personality of Janet Yellen, then chair of the San Francisco Fed and now the first woman to lead the Federal Reserve, showing glimpses of humor.

Yellen has a reputation for calling the recession ahead of her peers – one that is borne out in the Fed’s documents. In a January 21 meeting she said “the risk of a severe recession and credit crisis is unacceptably high, and it is being clearly priced now into not only domestic but also global markets.”

On September 16, the day after Lehman Brothers filed for bankruptcy, Yellen showed her lighter side as she gave evidence of an economic slowdown in San Francisco. “East Bay plastic surgeons and dentists note that patients are deferring elective procedures,” she said to laughter.

“Reservations are no longer necessary at many high-end restaurants. And the Silicon Valley country club, with a $250,000 entrance fee and seven- to eight-year waiting list, has seen the number of would-be new members shrink to a mere 13,” she said.

“Sales of cheap wine are soaring,” Yellen reported to the Fed on March 8, a week before Bear Stearns collapsed.

The fed to the rescue.

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On a principle level, it disgusts me. The idea that the government can forcefully prohibit me from working for £6ph even if I consent to it is abhorrent. My body. My labour.

It's easy to get around the rules- just work less hours for £6.31 an hour and get paid what you would have got paid if you had worked longer for £6.00 an hour.

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  • 2 weeks later...

http://www.zerohedge.com/news/2014-03-06/feds-fisher-admits-stocks-are-eye-popping-levels

While Janet Yellen fell back on the ubiquitous central banker statement that she "would do all that [she] can" it was Dallas Fed's Richard Fisher who raised the most eyebrows yesterday. In a speech in Mexico City, the central banker said he was concerned about "eye-popping levels" of some stock market metrics warning that the Fed must monitor the signs carefully to ensure bubbles were not forming. While other Fed members have paid lip-service to bubbles, Fisher explicitly discussed stocks in the context of the dot-com boom of the late '90s warning of "the ghost of 'irrational exuberance'" and worried about corporate bonds too.

Via Fox,

In his speech in Mexico City, Fisher said some indicators like the price-to-projected forward earnings, price-to-sales ratios and market capitalization as a percentage of GDP, are at levels not seen since the dot-com boom of the late 1990s.

He noted that margin debt is pushing up against all-time records.

"We must monitor these indicators very carefully so as to ensure that the ghost of 'irrational exuberance' does not haunt us again," Fisher said. While a few Fed officials have mentioned unease about stock prices, Fisher's comments are the most pointed to date.

Fisher did not spare the bond market, saying that narrow spreads between corporate and Treasury debt "reflect lower risk premia on top of already abnormally low nominal yields."

Bernanke has really pumped up a nice bubble, and when the dot com bubble burst the fed cut interest rates. Going to be interesting when this one goes pop!

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Charles Plosser said the central bank may have to speed up stimulus tapering.

In the US, Philadelphia Fed policymaker Plosser said the central bank may need to accelerate the pace of cuts to its bond buying programme in light of an improving economy. Speaking in Paris, he said: "Reducing the pace of asset purchases in measured steps is moving in the right direction, but the pace may leave us well behind the curve if the economy continues to play out according to the FOMC forecasts." Fed Chair Janet Yellen has indicated that the bank will continue to wind back quantitative easing until ending it all together later this year.

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  • 2 weeks later...

http://www.nytimes.com/2014/03/20/business/fed-cuts-bond-purchases-by-another-10-billion-as-expected.html?ref=business

Fed Cuts Bond Purchases by Another $10 Billion, as Expected

The Federal Reserve continued to curtail its economic stimulus, but it adjusted its guidance on interest rates, saying they would remain near zero “for a considerable time” after bond purchases ended.

It's the zombie economy.

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Yellen has played a blinder today in her first press conference as Fed Chairperson.

Apparentlyshe said that IRs would not rise until Spring 2015 and then later said they would rise in "about six months" - at which point the DOW went south.

I am not sure whether she said it as part of her speech or in repsonse to a question but there is a definite disconnect between Spring 2015 and 6 months.

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Yellen has played a blinder today in her first press conference as Fed Chairperson.

Apparentlyshe said that IRs would not rise until Spring 2015 and then later said they would rise in "about six months" - at which point the DOW went south.

I am not sure whether she said it as part of her speech or in repsonse to a question but there is a definite disconnect between Spring 2015 and 6 months.

Something is brewing. There is jostling and positioning going on.There are no good value investments. Everyone knows you can get rich buying good quality stuff from fire sales.

;)

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