The Us Debt Ceiling Thread

[zugzwang]

Yep if they decide to really play hard ball the consequences of the shutdown is going to have a very big effect on GDP if the stats are accurate. I wonder how long govt employers can go without pay for? I'm guessing many will have mortgages etc... to pay. There will certainly be a lot of worried people out there.

Not forgetting the impact it's having on global growth.

http://www.telegraph.co.uk/finance/financialcrisis/10350539/US-shutdown-risk-to-global-economy-says-Draghi.html

A protracted US government shutdown would threaten the global economy, European Central Bank president Mario Draghi has said.

Although Mr Draghi said he did not see the prospect of a US government default, he added: "The US budget shutdown is a risk if protracted.

"At the present time the impression one has is that it will not be so, but if it were to be protracted it's a risk to the US and the world economy we have to have this present in our minds."

Around 800,000 workers were told to stay at home on Monday after Republicans and Democrats failed to reach a US budget deal.

The last US government shutdown lasted three weeks in 1995 and cost the federal government $2.1bn (£1.3bn) in today's money.

According to Goldman Sachs, another three week shutdown could shave as much as 0.9pc from US GDP in the third quarter.

IHS, the research firm, estimates the shutdown is costing the US government about $300m a day.

Edited October 2, 2013 by zugzwang

[interestrateripoff]

http://www.theguardian.com/business/2013/oct/02/obama-bank-chiefs-economist-deep-recession

President Obama met bank executives including Goldman Sachs chief Lloyd Blankfein on Wednesday as economists, business leaders and European officials warned that the US government shutdown threatens to plunge the economy into a "deep and dark recession".

The meeting with finance chiefs came as the shutdown entered its second day and Obama prepared to meet with Republican leaders in the hope of ending the impasse. Business leaders expressed concern about the shutdown, and about a looming battle over the nation's $16.7tn debt ceiling.

Treasury secretary Jack Lew has warned that the US could default on its debts if the limit is not raised soon.

"There's precedent for a government shutdown; there is no precedent for a default," Blankfein told reporters after the meeting. He warned that the economic recovery was already "shallow".

The rhetoric game is increasing.

[interestrateripoff]

http://www.independent.co.uk/news/business/news/us-bankers-demand-higher-debt-ceiling-8854795.html

Wall Street chief executives last night urged Washington to resolve its issues and raise the federal debt ceiling after a meeting with Barack Obama.

Lloyd Blankfein, chief executive of Goldman Sachs, was among those present and declared: "There's a consensus that we shouldn't do anything that hurts the recovery. They shouldn't use the threat of causing the US to fail on its obligations to repay its debt as a cudgel."

..

Mr Moynihan said the bankers wanted to spread the message of how serious the current crisis is to the economy. Mr Dimon said: "We just want solutions. I think if people do the right things, America can grow aggressively and grow rapidly. That's what we should be looking for."

So Blankfein doesn't want anything to happen that will hurt the bankers, Dimon clearly just wants the US govt to do the right thing and give the bankers money.

[ReggiePerrin]

I'm not so sure it's a 'game' they're playing and one of them will blink sooner or later.

If the same Politicians that caused this mess put the right to buy Assault Rifles before the lives of Children, then I think they'll have no problem triggering a default to put their point across on Obamacare ... I think it'll have to get really bad before either side backs down, .e.g. a global financial crisis that hits gun sales

[1929crash]

The debt ceiling is not constitutional. The 14th Amendment states:

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned

http://legal-dictionary.thefreedictionary.com/fourteenth+amendment

[interestrateripoff]

http://www.bloomberg.com/news/2013-10-03/businesses-often-opposed-to-government-beg-for-its-return.html

It seems for U.S. businesses, the only thing worse than too much government is no government at all.

The U.S. Chamber of Commerce deployed its army of lobbyists to stress the importance to Capitol Hill lawmakers of ending the first partial government shutdown in 17 years. Across town, top Wall Street executives gathered at the White House and warned of the consequences if no resolution was found to the next crisis, a potential default on federal debt.

“This requires compromise by both sides,” Blair Latoff Holmes, a spokeswoman for the Washington-based Chamber of Commerce, which represents companies including Exxon Mobil Corp. (XOM) and Ford Motor Co. (F), said in an e-mail. “We will continue to hold discussions with lawmakers urging them to address this and stop kicking the can down the road.”

It's serious now the lobbyists are involved.

[interestrateripoff]

http://www.bloomberg.com/news/2013-10-02/government-shutdown-makes-contractor-s-headquarters-a-ghost-town.html

Since the U.S. government shutdown started, one-fourth of MicroTechnologies LLC’s workforce of 400 in Vienna, Virginia, has stayed home. The headquarters is like a “ghost town,” Chief Executive Officer Tony Jimenez said.

“I’ve seen more people cry in the last couple of days than the last few years,” Jimenez said in a phone interview yesterday, after six federal agencies he wouldn’t identify told the company to stop work on contracts. “You don’t take people’s jobs and play Russian Roulette with them.”

The partial shutdown that began Oct. 1 is beginning to have a ripple effect on federal contractors, which employ millions of people and attract more than $500 billion in annual awards. Costs will rise each day that government offices remain closed. The defense industry, the single biggest recipient of contracts, will likely be the hardest hit.

Are these people classed as govt employees in the official figures?

[interestrateripoff]

http://www.bloomberg.com/news/2013-10-02/united-technologies-sees-5-000-jobs-at-risk-in-shutdown.html

United Technologies Corp. (UTX), a supplier of helicopters and jet engines to the U.S. military, said an extended government shutdown would force furloughs of as many as 5,000 workers.

The first effect will be layoffs for about 2,000 Sikorsky Aircraft employees in Connecticut, Florida and Alabama on Oct. 7, United Technologies said yesterday. They may be followed by 2,000 furloughs at Pratt & Whitney and UTC Aerospace Systems if the shutdown lasts into next week, the company said.

The total “could exceed 5,000 employees if the government shutdown continues into next month,” United Technologies said in a statement. The Hartford, Connecticut-based company receives about 18 percent of its revenue from the government, Chief Financial Officer Gregory Hayes told analysts this week.

Job losses to be blamed on the Republicans?

Although I suspect the irony that these "private" sector jobs are dependent on govt will be lost.

[interestrateripoff]

http://www.bloomberg.com/news/2013-10-03/troops-forage-for-food-while-golfers-play-on-in-shutdown.html

Grocery stores on Army bases in the U.S. are closed. The golf course at Andrews Air Force base is open.

All 128 employees of the Saint Lawrence Seaway Development Corp. are working, while 3,000 safety inspectors employed by the Federal Aviation Administration are off the job.

The Food and Drug Administration is reviewing new pharmaceuticals. The National Institutes of Health is turning away new patients for clinical trials.

The seeming randomness of the U.S. government’s first shutdown in 17 years can be explained in part by anomalies in the spending Congress does and doesn’t control. Activities funded by fees from drug, financial-services and other companies are insulated from year-to-year budget dysfunction. The ones that get a budget from Congress get hit.

..

While many functions at Army bases continue, commissaries in the U.S. are closed, forcing troops and their families to shop at local stores that cost about 30 percent more, Lieutenant General Raymond Mason, the service’s deputy chief of staff for logistics, said yesterday at a House hearing.

“For the soldiers and their families, that’s very difficult,” Mason said.

And I bet said without a hint of irony about the locals who have no option to pay 30% more in their local shops.

Still at least they'll be able to play golf.

[The Masked Tulip]

Markets will plunge if they do not raise the ceiling - all those US Senators and Congress people seeing their own personal wealth plunge? What do you think they will do?

They'll get Bernanke in to give them a talk. He will say, IMPO, that the markets will plunge 20% or something big like that and they will all rush in to vote for the ceiling to be raised.

[The Masked Tulip]

There was an excellent blog by Gavyn Davies on the reaction of markets to this type of thing:

Why have markets ignored Washington risk?

Personally I would say it is very accurate.

Of course it is 'excellent' and 'accurate' because it is what I think.

Always with the proviso of "It is, until it isn't^tm"

I went and read that. I thought it was the least I could do. Hmm, so going to the wire huh with markets not panicking until that wire is really close?

Nice big drop, buy shares, debt ceiling raised, shares rise?

Edited October 3, 2013 by The Masked Tulip

[stormymonday_2011]

http://www.bloomberg.com/news/2013-10-02/government-shutdown-makes-contractor-s-headquarters-a-ghost-town.html

Are these people classed as govt employees in the official figures?

The US government must be the biggest single purchaser of private goods and services in the world so it is not just 'contractors' who are quasi government employees that are going to feel the pinch if this goes on for any length of time. Anyone who manufactures or supplies anything to Uncle Sam will potentially be hit.

This is without imagining what is going to happen in the financial markets if the US treasury defaults on any bond payments.

I the latter were to happen then Cameron's HTB2 would be sunk for a start

[The Masked Tulip]

Not necessarily. It is unpredicatble - you may have missed the markets-political and political-voter feedback mechanisms that come into play - see edited post above.

(actually I'm with Killer Bunny on reading the markets at the moment. It is worth keeping an eye on the yen (wrt usd). You will note its chart is very similar to a large number of commodity charts, including gold miners etc.)

Look, I know I understand the above but for everyone else here who doesn't what does this mean?

[interestrateripoff]

http://www.zerohedge.com/news/2013-10-03/treasury-warns-default-impact-could-last-generation

The President warned yesterday that "this time is different," and now the Treasury has weighed in with an even more ominous warning. In their statement, they note:

*TREASURY OFFICIAL: CONGRESS ACTION ONLY WAY TO AVOID DEFAULT

*TREASURY SEES 'TENTATIVE' SIGNS IMPASSE AFFECTING MARKETS

*TREASURY SAYS BILL YIELDS MAY REFLECT `NASCENT CONCERNS'

*TREASURY: DEFAULT IMPACT COULD BE PROFOUND, LAST A GENERATION

Looks like we'll be getting this daily now, just to make sure everyone knows how serious and how carefully they'll make this decision.

[interestrateripoff]

http://www.theguardian.com/business/2013/oct/03/christine-lagarde-us-debt-crisis-shutdown

Christine Lagarde urges US that debt crisis threatens world economy

IMF chief says US politicians must overcome shutdown and raise US debt ceiling before 17 October deadline

OECD and World Bank heads to follow?

[Roman Roady]

What about the "owners" of paper Gold receipts getting nervous and wanting to convert to physical?

That could be fun.

[@contradevian]

Look, I know I understand the above but for everyone else here who doesn't what does this mean?

correlation.

[The Masked Tulip]

Sounds like someone just went a bit nuts with a gun near the US Senate. I suppose being technically laid off without pay can do that to you?

[happy_renting]

The debt ceiling is not constitutional. The 14th Amendment states:

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned

http://legal-dictionary.thefreedictionary.com/fourteenth+amendment

But the point is... if the debt ceiling isn't raised, then the additional public debt hasn't legally authorised.

Thats the way I read it, anyway.

And this dispute is about the authority to create more debt, not the validity of the debt once created.

[markyh]

I went and read that. I thought it was the least I could do. Hmm, so going to the wire huh with markets not panicking until that wire is really close?

Nice big drop, buy shares, debt ceiling raised, shares rise?

I have a funny feeling this time the Republicans are will to burn the bridge to get rid of obamacare, and will pay the biggest game of chicken until he gives in. in preparation on Monday I sold in my SIPP 12 share holdings and six fund holdings all In good profit for a total of £30k in cash, about 40% of my total SIPP pot.

I will now sit and wait and see and jump back in with FTSE100 and 250 high yields once this gets resolved (or not) after the 17th. Happily 50% of the remaining pot is also depressed Gold related mining shares, funds and ETF's that may rocket if they take this game of chicken to end game by mistake!!

M

[The Masked Tulip]

I have a funny feeling this time the Republicans are will to burn the bridge to get rid of obamacare, and will pay the biggest game of chicken until he gives in. in preparation on Monday I sold in my SIPP 12 share holdings and six fund holdings all In good profit for a total of £30k in cash, about 40% of my total SIPP pot.

I will now sit and wait and see and jump back in with FTSE100 and 250 high yields once this gets resolved (or not) after the 17th. Happily 50% of the remaining pot is also depressed Gold related mining shares, funds and ETF's that may rocket if they take this game of chicken to end game by mistake!!

M

Out of interest, who is your SIPP with?

[markyh]

Out of interest, who is your SIPP with?

Hargreaves Landsdown. I went with them because a mate who works in the city is wjith then and rated them. They are also huge and FTSE100 I believe. However for lower fees and a better trading platform features I regret not going with the Share Centre, www.share.com. I have £10k in two trading accounts with them, one ISA, one standard. If you hold £100 of their shares (Share PLC) in any account you can trade shares for £5 a time, even once a month. HL charge £11.95 under 10 trades and still £5.95 for 20 trades + .

My SIPP pot came from in 2010 transferring out 20 years, 1987-2007 (£60k) of contracted out SERPS payments from the CO-OP Pensions. To be fair they did a pretty good job with it especially during the 2008 crash. I reckon their ethical play in safe investing saved that pot from being decimated back then. When I STR in 2007 I took £10k and started to trade shares for fun and to learn, come 2010 I was happy and confident enough to take charge of it myself in a SIPP.

M

Edited October 3, 2013 by markyh

[Venger]

I have a funny feeling this time the Republicans are will to burn the bridge to get rid of obamacare, and will pay the biggest game of chicken until he gives in.

A Congressman on R5 was anti-Obamacare, but his main point was 'we're stealing our children's futures.'

Can't believe I've come to want this, but a default would suit me just fine, if it had serious HPC repercussions in anti-capitalism UK. Maybe some congressmen feel the same for their young, unable to make their way ahead because speculators not been wiped out, and too little rebalancing from older interests. Maybe the banks even want it. You can't keep piling debt upon debt, and if it becomes so heavy you can barely move for it, best to shed some of the weight of it.

I'm not even bothered about taking a hit on my hard-earned substantial deposit toward buying a house saved over 15 years. Not against this market in which the authorities have involved themselves to first oversee prices bubbling up year upon year for a decade, then to keep prices high. Where old grannies won't sell run-down houses at less than £500K because they're 'not giving it away'. Landlords still hoovering up all property a young very well paid professional couple could buy with a big mortgage. Where older people on Escape To The Country laugh as they try and guess property prices on 4+ bed big houses at insane prices they consider normal.

http://www.reuters.com/article/2013/10/03/us-usa-fiscal-treasury-idUSBRE9920KA20131003

http://www.economist.com/news/united-states/21587250-shutdown-bad-enough-what-follows-may-be-far-worse-closed-until-further-notice

[dances with sheeple]

Hargreaves Landsdown. I went with them because a mate who works in the city is wjith then and rated them. They are also huge and FTSE100 I believe. However for lower fees and a better trading platform features I regret not going with the Share Centre, www.share.com. I have £10k in two trading accounts with them, one ISA, one standard. If you hold £100 of their shares (Share PLC) in any account you can trade shares for £5 a time, even once a month. HL charge £11.95 under 10 trades and still £5.95 for 20 trades + .

My SIPP pot came from in 2010 transferring out 20 years, 1987-2007 (£60k) of contracted out SERPS payments from the CO-OP Pensions. To be fair they did a pretty good job with it especially during the 2008 crash. I reckon their ethical play in safe investing saved that pot from being decimated back then. When I STR in 2007 I took £10k and started to trade shares for fun and to learn, come 2010 I was happy and confident enough to take charge of it myself in a SIPP.

M

Interesting info. I have a link from another thread about low cost trackers but have not dug through it all yet, someone said that my L+G tracker is expensive at charges of 0.56%, and that there are cheaper trackers out there, this tracker is an ISA though and my question to you is, do you know of where to find ISA trackers that have charges lower than the above?

[dances with sheeple]

A Congressman on R5 was anti-Obamacare, but his main point was 'we're stealing our children's futures.'

Can't believe I've come to want this, but a default would suit me just fine, if it had serious HPC repercussions in anti-capitalism UK. Maybe some congressmen feel the same for their young, unable to make their way ahead because speculators not been wiped out, and too little rebalancing from older interests. Maybe the banks even want it. You can't keep piling debt upon debt, and if it becomes so heavy you can barely move for it, best to shed some of the weight of it.

I'm not even bothered about taking a hit on my hard-earned substantial deposit toward buying a house saved over 15 years. Not against this market in which the authorities have involved themselves to first oversee prices bubbling up year upon year for a decade, then to keep prices high. Where old grannies won't sell run-down houses at less than £500K because they're 'not giving it away'. Landlords still hoovering up all property a young very well paid professional couple could buy with a big mortgage. Where older people on Escape To The Country laugh as they try and guess property prices on 4+ bed big houses at insane prices they consider normal.

http://www.reuters.c...E9920KA20131003

http://www.economist...-further-notice

Yes I hope it gets messy, then maybe some speculators will get their a*rses handed to them, and some UK sheeple will wake from their idiotic assumptions about house prices.