Shutdown Roundup: Weather, and Craft Beer, and Bonds, Oh My!

By Lambert Strether of Corrente.

Imaginary gardens with real toads in them. –Marianne Moore

Here’s a survey of Default/Shutdown information for the morning of the 17th, a crucial date. Or not! The first section, “The Great and the Good,” collects views from global movers and shakers mostly on Default (they’re against it), starting with the Chinese, who came back as the bond market. The Second Section, “The Rest of Us,” collects statements from the United States on the shutdown (bad for business). I deliberately left the quotes long, because all the speakers really seemed to want to stretch out about the role government plays in their lives.

The Great and the Good

Commentary: U.S. fiscal failure warrants a de-Americanized world Xinhua (official). Most Treasuries.

As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world.

Moreover, instead of honoring its duties as a responsible leading power, a self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies.

As a result, the world is still crawling its way out of an economic disaster thanks to the voracious Wall Street elites, while bombings and killings have become virtually daily routines in Iraq years after Washington claimed it has liberated its people from tyrannical rule.

Most recently, the cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations’ tremendous dollar assets in jeopardy and the international community highly agonized.

US must grasp global impact of debt crisis: Japan AFP. Next-most Treasuries.

“Many of them don’t seem to understand well the magnitude of the international impact this problem could have,” Aso said at a news conference, according to Dow Jones Newswires.

“In the worst scenario, there will be a default, which is serious” for Japan, one of the biggest holders of US government bonds, Aso was quoted as saying by the Nikkei daily.

“The impact is big at a time when the (Japanese) economy is about to grow,” he added.

But Aso also sounded an optimistic note, saying he expects the issue will be resolved.

“I guess there will be some compromise in time,” he told reporters. …

Japan holds some $1.1 trillion in Treasuries, making it the biggest lender to the US government after China.

Israel unprepared as U.S. debt default draws near Haaretz

Is Israel prepared for the possibility that the U.S. government will reach its legally mandated debt ceiling on Thursday?

If the worst-case scenario comes to pass, and the deadlock between the White House and Congress is not resolved in time, the U.S. bond market could collapse. A shock like that would reverberate across the global economy, including Israel’s.

In fact, such an apocalyptic scenario is being shrugged off by policy makers in Jerusalem. When asked by TheMarker what steps they were taking, one official said that was akin to asking about the contingency plans in the event Tel Aviv is hit by an atomic bomb. Another laughed off the question by suggesting the only policy option left would to invest in an online currency like Bitcoin.

As the responses to TheMarker’s queries shows, Israel has done little or nothing to prepare for a crisis of this magnitude or to assess the extent of its exposure.

2: IMF’s Lagarde discusses debt crisis, female leadership NBC

[LAGARDE:] Do you remember 2008, the beginning of the great recession?


[LAGARDE:] Well, if there was a combination of the government shutdown for a period of time and, more seriously, more damaging if the debt ceiling was not lifted with a degree of certainty and enough time so that people could sort of have the assurance that the economy was in good standing, that would bring about so much uncertainty, so much risk of disruption that the standing of the U.S. economy would, again, be at risk. That some of the obligations that the first economy in the world has would not be respected. And I think, you know, there was a lot of discussion amongst the finance ministers from all over the world about the technical aspects of it. And you can argue forever as to whether the impact is going to be 2.5, 3%, 5%, how much public spending will have to be cut, how many more people will have to be unemployed. But one thing is certain around the table, it was that if there is that degree of disruption, that lack of certainty, that lack of trust in the U.S. signature, it would mean massive disruption the world over and we would be tipped again into massive rupture. That was that tip at the big table.

The debt-ceiling doomsday device Martin Wolf, FT

[T]he administration also needs to decide what it would do if the ceiling were not to be lifted in time – be it now, next month or at a later date. The least bad answer would be: keep borrowing. The president cannot state he would do so, before the fact. Indeed, he must deny it, since knowing this would lower his opponents’ incentive to raise the ceiling. Yet, if it came to the worst, he would have to borrow, invoking the need to preserve the credit of the government, without which it would be permanently damaged.

Borrowing under a constitutional cloud would be risky. The simplest way to minimise these risks would be to borrow short-term. After all, the US Federal Reserve must ensure that the interest rate remains zero, in order to preserve its monetary policy. The House of Representatives might impeach the president for the “high crime” of ensuring the US government fulfils its promises, but this would fail in the Senate. Someone might challenge Mr Obama’s decisions in court. But how could a judge conclude that the president acted unconstitutionally if Congress has given contradictory instructions?

It is insane that such a discussion is even possible. Abolish the ceiling now. It is an invitation to mischief.

The default has already begun Felix Salmon, Reuters

The harm done to the global financial system by a Treasury debt default would not be caused by cash losses to bond investors. If you needed that interest payment, you could always just sell your Treasury bill instead, for an amount extremely close to the total principal and interest due. Rather, the harm done would be a function of the way in which the Treasury market is the risk-free vaseline which greases the entire financial system. If Treasury payments can’t be trusted entirely, then not only do all risk instruments need to be repriced, but so does the most basic counterparty risk of all. The US government, in one form or another, is a counterparty to every single financial player in the world. Its payments have to be certain, or else the whole house of cards risks collapsing — starting with the multi-trillion-dollar interest-rate derivatives market, and moving rapidly from there.

Fisher Says Fed Could Cushion Against a U.S. Debt Default Bloomberg

Federal Reserve Bank of Dallas

President Richard Fisher said the central bank could reduce the turmoil from any U.S. debt default, which he said is unlikely. “I’m very confident” in the ability of the Federal Reserve Bank of New York to “mitigate the chaos that might ensue should we default,” Fisher said today in a speech in New York. “I don’t think that’s going to happen.”

Treasury Paying $120 Billion in Bills Doubted as Fitch Warns Bloomberg

Investors holding $120 billion of Treasury bills coming due tomorrow are increasingly worried that they won’t get paid.

Rates on the bills, maturing the same day Treasury Secretary Jacob J. Lew has said the U.S. will exhaust its borrowing capacity, surged 12 basis points, or 0.12 percentage point, to 0.32 percent yesterday, according to Bloomberg Bond Trader prices. The securities, issued a year earlier, traded at a rate of negative 0.01 percent as recently as Sept. 26.

“That is how fear manifests itself,” said Marc Fovinci, head of fixed income at Ferguson Wellman Capital Management Inc. in Portland, Oregon, who helps invest $3.5 billion and holds about $500,000 of Oct. 31 bills in one account. “The market is discounting a day, or several days delay in payments.”

The Obama administration says Thursday is the day America runs out of cash. But Wall Street has its own estimate Guardian

As yet another political deal to raise the debt ceiling neared collapse in Congress on Tuesday, some Wall Street money managers have a new wheeze: that the “real” debt ceiling deadline is not Thursday, but instead 1 November.

“We do not fully understand the October 17 date,” wrote David Kotok of Cumberland Advisors. “But we do see November 1 looming as a massive entitlement payment date.”

Right or wrong, there’s a chorus of money-management voices pinpointing 1 November as the real drop-dead date to raise the debt ceiling.

Michael Drury, the chief economist for McVean Trading, said on 6 October that “the real fight is now focused on what concessions can be extracted for raising the debt ceiling and avoiding default – supposedly on October 17, but certainly by November 1 when the next large social security payment is due.”

Kristina Hooper, the US investment strategist at Allianz Global Investors, told clients in a note that November 1 is the “critical deadline.”

Brian Gardner, SVP of Washington research for investment bank KBW, also cautioned his clients that October 17 is not the drop-dead default date for the US government. “The Bipartisan Policy Center estimated that the X-date is between October 22 and November 1,” Gardner wrote on Tuesday, “so passing the 17th without a deal may not cause the disruptions in the markets that some fear, at least not immediately.”

The Rest of Us

Can We Please Reopen the Centers for Disease Control Before an Epidemic? The Atlantic

Gregory Poland, an infectious-disease expert at the Mayo Clinic:

Let me take you back to February 2009. Out of nowhere, a few unusual respiratory illnesses in a rural part of Mexico, and then a few of those cases in Texas, and then a bunch of those cases in the Northeast states. Within a couple of weeks, CDC investigates, sequences the viruses and pushes the button. “Nation: We’ve got a novel pandemic virus.” What would happen if that happened now? There would be delayed recognition, thousands more would get ill, would die. we would be flying blind. It would be delayed development of a vaccine to cover it, we wouldn’t know what antivirals to use.

The other thing could happen too. The season just kind of pedals along—no new viruses no surprises, no new viruses or infectious disease threats anywhere in the world. And the shutdown resolves and we’re a little behind on next year’s vaccines. We’re somewhere in that spectrum.

Climate scientists fight U.S. government shutdown Des Moines Register

Climate researchers are fighting the U.S. government shutdown with a petition that asks Congress to fund critical work in Antarctica before it’s too late this year.

Research in Antarctica often begins this month as temperatures warm. Scientists say they have a short window in which to collect measurements from ice sheets or lakes before glaciers and permafrost start thawing in mid-November. They say missing one season could ruin multi-year projects and cost extra money to restart.

[A] graduate student doing research in the South Pole, Elizabeth George of the University of California, Berkeley, says scientists could lose “not only this season but years worth of work.” Even if the government resumes in two weeks, she says, “the damage to decades of scientific research will be irreversible.”

Northwest storms, Alaska’s crab fishery: How the shutdown hurts Seattle Post-Intelligencer (SW):

The government shutdown is taking its toll on America’s — and the Northwest’s, and Alaska’s — ability to forecast who’s going to get hit and where. If you work on the water, it’s particularly vexing.

A Senate Commerce Committee hearing on Friday featured an exchange between Sen. Maria Cantwell, D-Wash., and Alaska fisherman Capt. Keith Colburn, of “Deadliest Catch” renown.

“Our own situation with the weather buoys that we have in the Northwest — it’s critical, vital information for us about weather that impacts fisheries,” said Cantwell. “I guess, Captain, you could say, ‘Well, we don’t have to worry about it because we’re shut down.’ But when they are fishing, it’s vital information.

“Instead of the buoys working, and giving information, last week we had a forecast between the Seattle area and Vancouver Island and we had no idea what was going to happen.

“When you’re talking about 60-to-70 mile per hour winds and weather forecasts . . . Not understanding whether the storm is going to hit in Seattle and what needs to be done, or whether the storm will hit in British Columbia, that’s where we were last week. We didn’t have the information, because there weren’t people on the job.”

Fed Shutdown Forces Ceasefire in Organic War: USDA Louisville Meeting Canceled Op-Ed News

Congress created the National Organic Standards Board (NOSB) to advise the USDA Secretary on policies impacting the organic industry and to specifically oversee and carefully review for approval any synthetic and non-organic material and ingredient used in organic farming and food production. Additionally, the NOSB reviews the approved substances that “sunset,” as the law governing organics requires that the materials be reevaluated every five years.

Now, the semiannual NOSB meeting, scheduled for the week of October 21, in Louisville, Kentucky, has been canceled.

“The USDA might have received a temporary reprieve with the cancellation of the NOSB meeting this month in Louisville, but the stakeholders who truly care about the integrity of the organic label, and the principles it was founded upon, are not going away,” affirmed Kevin Engelbert, a certified organic dairy farmer from New York and another former NOSB member.

Survivalist Industry Thriving on Debt Default Threat ABC

One sector of the U.S. economy is thriving on the threat of a debt default apocalypse.

Survivalist industries — from tactical training schools to doomsday bunker manufacturers — are reporting an uptick in business over the past few days, as a first-ever U.S. default has inched closer to reality. The trend is seen from Virginia to Florida, California to Indiana.

“We’re not quite Greece, but there’s a realization we’re moving slowly toward it,” said Robert Allen, owner of Sigma III Survival School in Huntington, Ark. “Economic collapse is the most common cause of people wanting to start preparing.”

The IRS Can’t Take Your Questions. It Will Take Your Return WYPR

Tuesday, Oct. 15,is the filing deadline for the roughly 12 million Americans who received an extension on their 2012 taxes. And having 90 percent of its staff furloughed in the partial government shutdown doesn’t mean the IRS doesn’t want your money.

“The IRS is shut down, but the tax law is never shut down,” says Joshua Blank, professor of tax practice and faculty director of New York University Law School’s Graduate Tax Program.

Pintful: Government shutdown hits North Carolina’s craft beer makers Charlotte News-Observer

The political impasse in Washington means a little-known government agency called the Alcohol and Tobacco Tax and Trade Bureau is closed. The TTB, as it is known, is a division of the Treasury Department that processes beer excise taxes and approves new breweries, recipes and labels.

It comes at a key time in the beer calendar, when breweries are trying to debut new seasonal beers for the winter months to satisfy a market always seeking new tastes and boundary-pushing recipes.

Kayne Fischer, a co-owner of Natty Greene’s Brewing Co., which has operations in Greensboro and Raleigh, said the “timing couldn’t be worse.” Natty Greene’s is redesigning all its labels and trying to expand into the Virginia and Washington, D.C., markets.

Expecting delays in Washington once the government reopens, Sumit Vohra, CEO at Lonerider Brewing in Raleigh, said he has postponed brewing any new beers until next year. “We don’t want to brew another one until they are back online,” he said. “There’s a shelf life to beer.”

Shutdown pinches smaller Washington aerospace firms, not Boeing yet Puget Sound Business Journal

In Seattle, Clay Lacy Aviation, an aircraft sales and charter company at Boeing Field, is ready to deliver a 12-passenger Bombardier business jet, worth about $3 million. But the company can’t close the transaction without finalizing it with the FAA registry in Oklahoma City, said Brad Wollen, vice president of aircraft sales.

So the used aircraft, ready to be sold to an overseas buyer, is instead sitting on the tarmac at Boeing Field in Seattle.

“Those (FAA) people now are out on furlough, nobody can buy or sell an airplane in the United States,” Wollen said.

This transaction is just one of 10,000 transactions monthly that require filing with the registry office, said Ed Bolen, president and CEO of the National Business Aviation Association, in an interview.

Hyundai USA CEO: Shutdown cuts 10% of auto sales USA Today

Hyundai Motor America CEO John Krafcik gave an interview to Bloomberg News in which he said that now, 15 days after it began, the shutdown is threatening to shave 10% off car sales this month.

Ten percent may not sound like a lot, but in terms of the auto industry, it’s massive: almost 112,000 fewer cars that would have been sold last month if it had happened then. It isn’t the shutdown itself that appears to be putting a lid on sales. It’s the uncertainty it creates.

“It’s that anxiety that keeps customers, potential buyers, on the sidelines when making a big purchase like an automobile,” he told Sara Eisen of Bloomberg Surveillance. “We’ll probably see the industry off five to 10% this month, compared to where it was in September. I think a lot of it has to do with this shutdown discussion.”

Krafcik comments dovetail with an unscientific online survey conducted by Kelley Blue Book that found 18% of potential car buyers may be stay away from the car lots until the government reopens.

Veterans Have ‘A Lot of Anxiety’ About Losing Benefits, Rally at World War II Memorial ABC

“They’re worried about losing their homes, they’re worried about losing their cars, they’re worried about where they’re going to live if they’re going to be homeless, so it’s quite the undertaking for them right now,” [Audree Morrison, a veteran of the Michigan National Guard] said. “It’s very hard when you see things that you know should be getting done in a different way, and veteran’s benefits and taking care of them, I believe, should really be top priority in the country right now, and to see that not being top priority and seeing all these soldiers and these service members getting hurt from that and not knowing where they’re going to turn after all this time they’ve put in to serve and risking their lives or giving their lives and having their spouses and children left behind, it’s very difficult to watch.”

* * *

I wouldn’t even venture to predict what’s going to happen, although for whatever reason Mr. Market seems to have decided that 11/1 is the date to watch, not 10/17. I think Yves has the right frame though: Using the lens of negotiation positions. Remember: The Senators — and how uncomfortable for those Senators who don’t look at themselves in the mirror and see a President, like all of ’em — are only agents: Obama on the one hand, and the House Republicans on the other, are the principals. So it’s no wonder that the Reid and McConnell are all lovey-dovey and calm; they’ve got no skin in the game. And it’s no wonder that the principals are having a hard time getting to Yes; both believe they were elected fair and square, neither trusts the other (and with good reason), and both are engaged in a party/tribal/regional/cultural grudge match of inconceivable proportions. If Mr. Market swoons — and can’t whoever’s got their hand up Mr. Market’s *** just take care of that? — the principals will come to an agreement fast enough, and get back to the happy and mutually agreed upon task of gutting Social Security and Medicare and then feeding on the steaming entrails, but paradoxically Mr. Market thinks — or is allowed to believe he thinks — that the whole sorry spectacle is kayfabe (which of course it is too, this being Washington), and is looking out the window, humming to himself, instead of swooning as he ought. How reflexive.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. middle seaman

    The deal we hear about is a bad joke. It delays the crisis for two months. Is the Tea Party going to change into the Coffee Party in two months?

  2. PaulArt

    I wonder if one advantage of seeing this to the bitter end would be advantageous in the long term to the country. Is there a chance that the majority of the Tea Party brigade, the ones who carry Confederate Flags and whine ‘keep Gummint hands off my Medicare’ might realize they were nothing but cannnon fodder for their richer cousins in Virginia and elsewhere residing in million dollar mansions? That would be a consummation devoutly to be wished. It would be really gratifying to see especially the Senior Caucasian duffers get kicked in the seat of their pants rendering said anatomy tender and unable to polish Church Pews.

    1. Banger

      There is a section of the ultra-right which is not just anti-government but anti-authoritarian and believes that the rich oligarchs are as much the enemy as the government. But, in the end, most of these people have a religious-like reverence for the rich. I believe that the impetus for this version of the ultra-right is that it is primarily anti-modernist, anti-intellectual/rational and for a new form of feudalism that features simple rules and unquestioned authority. Few of these people have a moral sense that goes beyond pre-adolescence. This explains the predominance of evangelicals who require an deeply authoritarian religion to feel secure in their lives.

      1. PaulArt

        Yes, the ‘authoritarian’ part they wear on their sleeves but to date I have yet to hear them rail about Oligarchs or Monopolies. The closest I came to hear them say something bad about monopolies was when a close relative used obscenities while discussing his latest ‘overdrawn’ fees at the Bank. From being ripped off to questioning why that happens and pursuing it via reading and education – now that’s the part I think is the obstacle for them. Since they like their ‘wisdom’ spoon fed, they fall ready victims to Faux News. Can’t say this is true only of the Evangelical Right. There are innumerable Obamabots and Clintonpots who watch MSNBC and swallow Center Right bilge water.

        1. Banger

          Check out Alex Jones and the people he connects with and very, very eclectic and diverse group–even that is an understatement.

  3. Jefemt

    Reviewing the list of ferinstances, perhaps there is some over-reach and institutional largesse? My cynical experience is that the government growth and laws/rules come about either for protectionist objectives by businesses who don’t like competition, or a reaction to bad behavior by the private sector. Funny thing that… choices and consequences

  4. Expat

    Just a thought: where would the USA be had the Democrats resisted the Reagan onslaught in 1981 instead of embracing the destruction of the middle class, the outsourcing of the economic base, the transfer of the 99%’s wealth to the .1%, not to mention accelerated catastrophic climate change? A little bit of spine would have been nice in those days. The debacle we have witnessed is totally related to the past 35 years of Democratic politicians selling out their base.

    1. Banger

      In retrospect it is pretty obvious–the DP decided even before Reagan that it’s future viability lay in courting the corporate sector and I think that was a rational decision. The fact is that the American people wanted to go in a rightward direction. Anti-union, pro-Cold War, pro-patriotic sentiments dominated political life at that time. At the same time, the left, the union movement was in decline for a number of complex reasons so what else could the DP do?

      1. Cassiodorus

        The Democratic Party was an elite institution from its beginnings, and thus its cosponsorship of the neoliberal passive revolution should come as no surprise. Jimmy Carter IIRC was one of the founders of the Trilateral Commission…

      2. James Levy

        Part of it was also personality-driven. The Democrats had no answer to Reagan’s charisma and Tip O’Neil really believed he could snow the bastard. He did get major tax increases out of Reagan in ’83 and ’84. And the Reagan spending juggernaut did revive the highly unionized Defense industrial sector, so many Dems could live with the Kennedy-style military Keynesianism. What they failed to address was the ideological creep and the hollowing out of institutions and the erosion of commitment to the poor and the working class. Robert Hughes had the balls to say, “too much talk about gays, women, and political correctness, no effort towards economic justice” (he was partially right about that, but that’s easy for me, a straight white guy, to say). Not everyone gave into the nascent DLC ideology of accommodation to power, but they also lost the language and zeal for fairness, justice, and sticking up for the little guy.

        I dare people to watch the short, “What is America to Me?” with Frank Sinatra. It was the most powerful piece of American propaganda (and I mean that in a good way!) I’ve ever seen. It is the quintessence of “we’re all in this together!” It was the ideology of the New Deal Era perfectly explicated in about 10 minutes. It would make grown men weep, if we could still believe in it. What the Democrats lost in the period 1969-1985 was the ability to believe in the dream. So they made their peace with American reality, and American reality is all about money and power.

        1. PaulArt

          Can anyone here recommend a good book that clearly documents this slouching of the Democrat party towards the Corporate trough starting with the late 60s? Was it then? I have searched high and low but have not found one. I eagerly bought ‘Herding Donkeys’ but was disappointed. ‘Death of the Liberal Class’ also was not party centric. I just want to get a few names apart from Tip O Neil. I thought Age of Greed might have recorded something but even that did not touch this issue. I know faintly from the recesses of my memory that it started with this Texas Congressman – his name eludes me….but the point is, there is a story there and seems to me no one has yet told it?

          1. craazyboy

            Don’t know of a book, but if you do a wiki search on the following, you can get a pretty good idea:

            Trilateral Commission

            Council on Foreign Relations

            Washington Consensus

  5. Samuel Conner

    If the Social Security Administration can repo its special Treasury securities to the Fed, it could make timely payments until the Trust Fund is exhausted. Further, with no borrowing authority, all SS payroll taxes would be paid in cash to the SSA rather than borrowed by Treasury to fund the deficit. This could go on for quite a while.

    Treasury would be in default, but the SS payments would still go out for a long time.

  6. craazyboy

    Some shorter headlines:

    China shocked over potential US Treasury default; considers branding the US as a “currency manipulator”

    Abe calls on America to stop printing money and keep paying it’s bills!

    Israel fears interruption in US foreign aid and questions whether Obama takes his Nobel Peace Prize seriously.

    Martin Wolfe: “But, but Keynes”

    Felix Salmon: “Default on $12 trillion of AAA securities would muck up markets”

    Richard fischer: The Fed would still like Treasuries, in this case.

    Fitch: We’re from France.

    Wall Street: The world doesn’t end on the 17th. At least another 10 trading days.

    North Carolina to Government – Keep your hands off my craft beer!

    1. craazyboy

      Almost forgot. Last, but not least..

      IMF’s Lagarde asks: Do you remember when the USG paid for the 2008 Great Financial Crisis? – then decides to dissemble with a bunch of gooblygook.

  7. Dan Kervick

    My son is in Lima working on an unpaid internship at the Central Reserve Bank of Peru. I asked him what the feeling was down there about the debt ceiling standoff, and he said the attitude is that the US is selfish for even considering doing something that would cause a global financial panic.

  8. Banger

    It may go to the Constitutional crisis that I think the TP want. If the right-wing oligarchs want anything it is a crisis of authority. Their goal is to dis-empower the central gov’t and continue to get people to lose faith in Congress and the administration. This project has worked in the past. The whole project of the right consisted of demonizing Washington which, in turn, created things like “down-sizing” government or “re-inventing” government which had the effect of gradually destroying the Civil Service system by substituting contractors for gov’t employees. In my view this has been a way of sabotaging the system and making inefficiency and waste worse not better therefore causing more people to lose faith in the Feds.

    Even the stupid actions of the TP in Congress further alienate the population.

    1. Yves Smith

      Many of the Tea Party Congresscritters believe their seats are secure and/or that the only threat to them is to the right.

      If there is a partial default on Social Security payments (the 23rd and I believe again Nov 1, not checking due to the hour), I think the TP will unleash something they can’t control. When you get old people on the streets, you are done. The police can’t rough them up much/at all without getting horrible press (unlike young people who are subconsciously assumed to be hoodlums, particularly if they happen to be or look too ethnic) and they may be the one class of people even our quasi military police would hesitate to shoot if they were to assemble.

      But the word is there is probably a deal today. This from a source on the Hill.

      1. craazyboy

        SS payments are still 100% funded by payroll taxes. The “shortfall” we have hearing about the past couple years is still within the interest amount being paid to the trust fund and doesn’t have an impact on current payments.

        Then, SS and Medicare are classified as “mandatory spending” programs in the annual budget. To my thinking anyway, that means cash flow from payroll taxes cannot be diverted to “non-mandatory” spending.

  9. Mud

    Also, thanks to fiscal anarchy, the state can put off the public disgrace of human-rights review until next March. The most entertaining face-to-face shame would have started tomorrow. Whew!

    Of course, by then we’ll get more NSA outrages from Greenwald and his rights defenders, and each of them will get duly cranked into the High Commissioner’s privacy intitiative. We’ll hear lots more about the binding treaty law of Article 17 and General Comment 16 (“Surveillance, whether electronic or otherwise, interceptions of telephonic, telegraphic and other forms of communication, wire-tapping and recording of conversations should be prohibited.”) We’ll hear lots more about US government reprisals against human rights defenders such as Chelsea Manning, Susan Lindauer, Lynne Stewart, John Kiriakou, and Thomas Drake. And the US police state will be weaker, more isolated, and more despised by its subject population and the world.

  10. docg

    What I find especially amusing about the current “crisis” is the truly hilarious irony. After all, what was it we 60’s protesters wanted most in the world to achieve? to “Bring Down the System.” Destroy it. Shut it down. But none of us actually had the combination of chutzpah, street-smarts and strategic know-how to accomplish such a formidable task.

    The so-called “progressives” of today are no more courageous or ingenious than their predecessors. And, as a member of both groups, I must admit, I’m no better than anyone else in this respect. As much as so many of us might have wanted over the years to bring down the system, none of us ever had a clue as to how to go about doing that, to the point that it became just another of our hopeless pipe dreams.

    And now, to the astonishment and alarm of the entire world, the most regressive, narrow minded, bigoted, mean-spirited political faction in the history of the United States since the civil war, is about to achieve precisely what so many of us have only been able to dream of. They are, indeed, on the verge of bringing The System to its knees.

    Perhaps the most appropriate response, under the circumstances, would be a simple: Halleluiah!

    What is supremely ironic, of course, is the embarrassing fact that the goals of the Tea Party are diametrically opposed to those of us 60’s “radicals.” We wanted to bring down the system to make the world fairer, more equable, more open, less racist, less sexist, and, last but not least, more fun. The Republican arch-conservatives want nothing of the sort. But once that system is brought down, there is no way to predict what sort of system will arise to replace it — and for the almighty Tea Party, there’s the rub. Because, realistically, the system they’ll be destroying is: Capitalism. And the system most likely to arise in its place is: Socialism.

    So be it. Let the Tea Party prevail — let Capitalism disintegrate into ashes. I, for one, can’t wait.

    1. anon y'mouse

      gov’t might die but capitalism has already taken over, and it is immortal & unconscionable.

      you will not like Gov 3.0.

    2. JTFaraday

      I have to agree with anon y’mouse. The Tea politicians are not “bringing the system to its knees.” They will create at most a largely temporary chaos, following which “the system” will emerge stronger than ever.

      That is simply the direction in which the bureaucracy, the Obama Administration, and the preponderance of our bought and paid for legislatures are inclined to go. Very slim chance of any other outcome, even if the Tea politicians sought any other outcome, (which I very much doubt).

      An article anon y’mouse posted yesterday by the educator Henry Giroux put it quite well I thought:

      “”Obama may not be responsible for the government shutdown and the debt ceiling crisis, but he can be charged with furthering a climate of lawlessness that feeds the authoritarian culture supportive of a range of political, economic and cultural interests…

      The new extremists in the Republican Party are simply raising the bar for the authoritarian registers and illegal legalities that have emerged under Bush and Obama in the past decade – including the bailing out of banks guilty of the worst forms of corporate malfeasance, the refusal to prosecute government officials who committed torture, the undermining of civil liberties with the passage of the Patriot Act, the National Defense Authorization Act, the establishment of a presidential kill list and the authorization of widespread surveillance to be used against the American people without full transparency…

      Paraphrasing Eric Cazdyn, all of society is now at the mercy of a corporate, religious, and financial elite just as “all ideals are at the mercy of [a] larger economic logic.””

      1. docg

        Well, at the very least, you have to hand it to the mad tea partiers for having the guts and also the know-how to organize to the point they have, and to have the ability to take things to such an extreme, something we “progressives” have never even come close to achieving. Even if they don’t succeed in taking down the system, and capitalism along with it, at least they’ve demonstrated that radical change IS possible, a lesson we should all take to heart.

        Our problem is that we’ve grown far too complacent and no longer seem to have that hunger we once had to organize and act decisively.

        1. JTFaraday

          I will grant you that they have cohones, and the quote I posted above includes list above of worthy objects of concerted attack.

          You will notice however, that whatever the ostensibly “libertarian” Tea Party says about these issues, their Tea politicians didn’t take the government hostage to reverse or dismantle a single one of them.

          Did the Tea politicians, for example, insist on even temporarily shutting down the NSA, the even temporary closure of which would be broadly popular? Here is an easy opportunity to score points with the public. Which they didn’t take.

          Rescinding a “medical devices tax,” OTOH, is not something over which one takes the government hostage. It is something for which one introduces a bill in Congress, and then allows the Constitutional democratic process to work. It’s a bought and paid for legislature. It shouldn’t be too hard.

          I therefore find myself concluding that Giroux has a point when he states that “the partial government shutdown is a precondition and test run for a full coup d’état.”

          The point is the shutdown itself, the abeyance of even the remnants of the democratic process, in order to advance, without challenge, a narrow set of interests and values under a police state regime.

  11. diptherio

    I like the thought that we’re seeing both a negotiations cluster**** and a bit of kayfabe.

    I think the Abelian sandpile model might be applicable here, as it feels to me like we’re currently perched at a “critical angle”.

    The Abelian sandpile model, also known as the Bak–Tang–Wiesenfeld model, was the first discovered example of a dynamical system displaying self-organized criticality. It was introduced by Per Bak, Chao Tang and Kurt Wiesenfeld in a 1987 paper.[1]

    The model is a cellular automaton. In its original formulation, each site on a finite grid has an associated value that corresponds to the slope of the pile. This slope builds up as grains of sand are randomly placed onto the pile, until the slope exceeds a specific threshold value at which time that site collapses transferring sand into the adjacent sites, increasing their slope. Bak, Tang, and Wiesenfeld considered process of successive random placement of sand grains on the grid; each such placement of sand at a particular site may have no effect, or it may cause a cascading reaction that will affect many sites. These “avalanches” are an example of the Eden growth model.


    Once the sandpile model reaches its critical state there is no correlation between the system’s response to a perturbation and the details of a perturbation. Generally this means that dropping another grain of sand onto the pile may cause nothing to happen, or it may cause the entire pile to collapse in a massive slide.

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