- by New Deal democrat
Weekly Indicators at XE.com. The link takes you to the post - surprsingly positive, ocnsidering....
Saturday, 19 October 2013
Friday, 18 October 2013
- by New Deal democrat
Bottom line: initial jobless claims are still in an improving trend. Click on this link to read the full post at XE.com.
Over the last few weeks one of the most common refrains from the idiots who got us in this mess (teaparty, reality denying jackasses) is the takeover of America by an exploding federal government. Unfortunately, that just isn't the case.
Total federal expenditures have in fact been remarkably stable over the last 4 years. When we look at a longer time series of total federal spending to GDP, we get this:
First, in the above graph notice the largest percentage of government spending/GDP figure we get is about 26%, and that was in response to the worst recession since the Great Depression. This is standard economic policy 101, and if you don't like it, please re-read Samuelson's Economics textbook (now in its 18th Edition, I believe). Also note the quick decline we see after that event, indicating the high level of spending relative to GDP most obviously did not continue. In short, we did engage in extraordinary measures -- but in response to an economic meltdown caused by a freezing of the financial sector, literally forcing us into bold action. And, what we did is part and parcel of basic economic thinking.
And about too many federal employees we get the above chart: aside from the obvious spikes caused by the census hiring, total federal employees have in fact also been remarkably stable over the last 40 years.
Bottom line: there is no takeover by the federal government.
I realize the above uses charts and data, which are anathema to your way of arguing. However, please make an effort to try to learn basic logic and methods of supporting an argument in the future.
Total federal expenditures have in fact been remarkably stable over the last 4 years. When we look at a longer time series of total federal spending to GDP, we get this:
First, in the above graph notice the largest percentage of government spending/GDP figure we get is about 26%, and that was in response to the worst recession since the Great Depression. This is standard economic policy 101, and if you don't like it, please re-read Samuelson's Economics textbook (now in its 18th Edition, I believe). Also note the quick decline we see after that event, indicating the high level of spending relative to GDP most obviously did not continue. In short, we did engage in extraordinary measures -- but in response to an economic meltdown caused by a freezing of the financial sector, literally forcing us into bold action. And, what we did is part and parcel of basic economic thinking.
And about too many federal employees we get the above chart: aside from the obvious spikes caused by the census hiring, total federal employees have in fact also been remarkably stable over the last 40 years.
Bottom line: there is no takeover by the federal government.
I realize the above uses charts and data, which are anathema to your way of arguing. However, please make an effort to try to learn basic logic and methods of supporting an argument in the future.
Thursday, 17 October 2013
From the NY Times:
Even with the shutdown of the United States government and the threat of a default coming to an end, the cost of Congress’s gridlock has already run well into the billions, economists estimate. And the total will continue to grow even after the shutdown ends, partly because of uncertainty about whether lawmakers might reach another deadlock early next year.
A complete accounting will take months once the government reopens and the Treasury resumes adding to the country’s debt. But economists said that the intransigence of House Republicans would take a bite out of fourth-quarter growth, which will affect employment, business earnings and borrowing costs. The ripple from Washington will be felt around the globe.
“We saw huge effects during the summer of 2011, with consumer confidence hitting a 31-year low in August and third-quarter G.D.P. growing just 1.4 percent,” said Beth Ann Bovino, chief United States economist at Standard & Poor’s, referring to earlier brinkmanship over the debt ceiling. “Given that this round of debt ceiling negotiations” took place during a shutdown, she said, “the impact on the economy could be even more severe.”
. - by New Deal democrat
Both temporary and permanent damage has been done to the US economy due to the latest fiscal crisis. Standard and Poors estimates that the US lost $24,000,000,000 of output due to the government shutdown. But the damage is more permanent. This is from CNBC:
Currency analysts have told CNBC that the dollar's status as a reserve currency will suffer long-term damage from the impasse.But at least fiscal hostage-taking has been well and truly killed, right? According to CNN, Obama certainly thinks so:
"I think it's part of the demise of the dollar as an international reserve currency," Chris Watling, CEO of Longview Economics, said of the U.S. government's political impasse. Alasdair MacLeod, head of research at GoldMoney Foundation, agreed saying the dollar's credibility has taken a "very, very bad hit".
if the dollar loses status as the world's most reliable currency, the United States will lose the right to print money to pay its debt and could be forced to pay this debt.
As Obama walked away from a press conference Wednesday night, he was asked whether he thought America would be going through this brouhaha again in a few months.And so do Congressional democrats, According to Felix Salmon:
His answer: "No."
Democratic aides are confident GOP debt limit extortion is effectively dead. They acknowledge the Cruz-ites will try for another debt limit crisis, but can’t imagine GOP elites will humor this demand next time, when the 2014 elections are underwayBut remember, Washington democrats also thought that the GOP would never, ever let the sequester happen. And everybody else seems to think the GOP will be right back for another bite of the apple in three months. From the same CNN article quoted above:
[F]ormer House Speaker Newt Gingrich predicts tea party and staunch conservatives in the GOP will be more energized after not getting the anti-Obamacare amendments they wanted.So does Felix Salmon:
"They will be more embittered, more angry. They will find more ways to go after Obama because they can't find any way to get him to negotiate," he said, adding that he expects Obamacare to become the defining issue of the next two elections cycles.
The Tea Party doesn’t take legislative defeat as a signal that it’s doing something wrong: it takes it as a signal that nothing has really changed in Washington and that they therefore need to redouble their nihilistic efforts. Take it from me: come February, or March, or whenever we end up having to have this idiotic debt-ceiling fight all over againSo does John Chambers, the managing director of Standard and Poor's rating service:
"We think that we'll be back here in January debating the same issues. This is, I fear, a permanent feature of our budgetary process."And here is one final bitter dose of the consequences, from Michael Carey of the Wall Street Journal:
The world has lost its faith in the U.S. It no longer deserves to be a Triple-A credit.Warren Buffet this week called the debt ceiling "a political weapon of mass destruction.". It must be repealed in full.
This was encapsulated in the nods of agreement that were seen in a packed auditorium at a Washington conference of international bankers on Friday when a visibly angry BlackRock Inc.BLK +2.82% CEO Laurence Fink told the audience that the U.S. is not a “principled nation.”
When men and women who control tens of trillions of dollars in U.S. investments are indicating they’ve lost their faith in America, it goes to the very question of whether the U.S. deserves to be at the center of world finance. So, whether or not Fitch Ratings follows through on the “Negative Watch” status that it placed on its top-notch U.S. rating Tuesday, it’s clear now that the dysfunctional American political system no longer justifies a Triple-A rating from anyone.
Wednesday, 16 October 2013
Welcome to this special edition of the Bonddad blog!
Today or tomorrow could be extremely important days in the market as we wait to see it Washington actually solves the debt problem (if only for a mere 4-6 months) or lets the nation default.
9:45 pm CDT: The House passes the bill 285 to 144, with 85 republicans joining all of the democrats. Obama signs the bill. $24,000,000,000 was utterly wasted for nothing. And the clock now starts ticking towards the next crisis in three months.
7:20 pm CDT: The Senate appved kicking the can down the road three months by 81 to 18. On CNN, the lesson Gloria Borger draws is that President Obama needs to anger progressives about Social Security and Medicare.
3:00 CDT: After the deal, the DJIA closes up 200 points, completely reversing yesterday's losses. The 10 year treasury closes at 2.66%, down in yield almost 0.09%, not quite at its October low.
Marketwatch at 11:16 am CDT: "Senate leaders agreed on a plan to fund the federal government through Jan. 15, lift the debt ceiling through Feb. 7, and set up a committee to hammer out broader budget issues. The agreement sets a Dec. 13 deadline for a report on a wide budget plan.". Translation: We'll be back here in 3 months.
10:00 AM CDT: Stock vaulted higher with the DJIA up nearly 200 points on word that the Senate was "very close" to a deal, and that the House would be permitted to vote on that deal. Bonds, meanwhile, did sell off slightly, with the 10 year bond yielding as much as 2.748% (it was at 2.62% on October 3). Bonds matureing on October 24, which had been yielding 0% in late September, were trading as high as 0.72%.
Marketwatch at 8:01 CDT: "[C]learing banks are unwilling to finance paper that matures by the end of year, causing a fairly chaotic environment," said Thomas di Galoma, co-head of fixed-income rates trading at ED&F Man Capital Markets, in a note.
We're already getting preliminary news that the markets are not happy.
From Marketwatch at 7:46 CST: Short-term treasuries are spiking.
From Marketwatch at 7:46 CST: Citigroup has dumped all its short-term treasuries.
NDD here with a brief note: (1) remember that the "best" outcome being discussed right now is that we kick the can down the road for 4 months and then do this all over again. (2) ICSC same store sales last week were only up 1% YoY. That is the worst YoY reading since the recovery began 4 years ago.
From Bonddad: A note on why the short-term treasury spike is so important: there is a market between companies called the repo market. It's essentially a short-term collateralized loan market where one party will essentially give a second market a specific amount of treasury bills in exchange for a short-term loan. For example, company A needs $10 million because of an unexpected cash short-fall. They're a large company who just happened to run into a short-term cash crunch. But while they may be short on cash, they do have Treasury Bills as part of their cash management strategy. So they give $10 million of T-Bills to a second party who essentially makes a collateralized $10 million dollar loan to the first party. 30 days later, Company A has sufficient cash on hand to repay the loan, so they do so and get their $10 million in T-Bills back.
Here's the rub: this transaction which is incredibly common and a bedrock of modern treasury management requires a "riskless" security to perform. Enter the T-Bill which is backed by the full faith and credit of the US government. The T-Bill makes this a routine and standard transaction. But remove the riskless nature of the T-Bill and you've got big problems in the financial world as this market grinds to a halt, making short-term lending impossible. That completely cripples trade and commerce, and that is why this situation is so deadly.
From Bonddad: Krugman as a link to a Macroadvisers report which shows that since these budget shenanigans began we've lost GDP.
Senate is taking the lead in budget negotiations.
Here's a piece on XE on the already negative impacts.
Warren Buffet Calls it like he sees it: this is "asinine."
Senate is real close to a deal:
Top aides to Senate Majority Leader Harry M. Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) are working to finalize plans to raise the debt limit through Feb. 7 and end the 16-day-old government shutdown, after a House Republican effort to forge a solution collapsed Tuesday in humiliating failure.
“We are getting real close,” Sen. Charles E. Schumer (D-N.Y.) said just before 11 a.m., as Republicans began to enter a meeting at which they were expected to finalize the plan.
As of 12:21 CST, the markets are still rallying. The SPYs gapped higher at the open and then continued to move up, eventually peaking at 172. Since then we've seen a slight downward consolidation, but not a panic sell-off.
In addition, it appears the Senate has a deal:
Senate leaders announced last-minute agreement Wednesday to avert a threatened Treasury default and reopen the government after a partial, 16-day shutdown. Congress raced to pass the measure by day's end.
The Dow Jones industrial average soared on the news that the threat of default was fading, flirting with a 200-point gain in morning trading.
McConnell said that with the accord, Republicans had sealed a deal to have spending in one area of the budget decline for two years in a row, adding, "we're not going back."
One prominent tea party lawmaker, Sen. Ted Cruz of Texas, said he would oppose the plan, but not seek to delay its passage.
Now we move on to the House, where the results are anything but certain.
Treasuries are also rallying in anticipation of a deal. From the FT:
It's not just stocks that are rallying as confidence grows that Congress will pass a deal that removes the possibility of a US default.
US government bonds are, too. The yield on the ten-year note fell 8 basis points to 2.67 per cent, echoing gains for longer and shorter maturities.
Today or tomorrow could be extremely important days in the market as we wait to see it Washington actually solves the debt problem (if only for a mere 4-6 months) or lets the nation default.
9:45 pm CDT: The House passes the bill 285 to 144, with 85 republicans joining all of the democrats. Obama signs the bill. $24,000,000,000 was utterly wasted for nothing. And the clock now starts ticking towards the next crisis in three months.
7:20 pm CDT: The Senate appved kicking the can down the road three months by 81 to 18. On CNN, the lesson Gloria Borger draws is that President Obama needs to anger progressives about Social Security and Medicare.
3:00 CDT: After the deal, the DJIA closes up 200 points, completely reversing yesterday's losses. The 10 year treasury closes at 2.66%, down in yield almost 0.09%, not quite at its October low.
Marketwatch at 11:16 am CDT: "Senate leaders agreed on a plan to fund the federal government through Jan. 15, lift the debt ceiling through Feb. 7, and set up a committee to hammer out broader budget issues. The agreement sets a Dec. 13 deadline for a report on a wide budget plan.". Translation: We'll be back here in 3 months.
10:00 AM CDT: Stock vaulted higher with the DJIA up nearly 200 points on word that the Senate was "very close" to a deal, and that the House would be permitted to vote on that deal. Bonds, meanwhile, did sell off slightly, with the 10 year bond yielding as much as 2.748% (it was at 2.62% on October 3). Bonds matureing on October 24, which had been yielding 0% in late September, were trading as high as 0.72%.
Marketwatch at 8:01 CDT: "[C]learing banks are unwilling to finance paper that matures by the end of year, causing a fairly chaotic environment," said Thomas di Galoma, co-head of fixed-income rates trading at ED&F Man Capital Markets, in a note.
We're already getting preliminary news that the markets are not happy.
From Marketwatch at 7:46 CST: Short-term treasuries are spiking.
From Marketwatch at 7:46 CST: Citigroup has dumped all its short-term treasuries.
NDD here with a brief note: (1) remember that the "best" outcome being discussed right now is that we kick the can down the road for 4 months and then do this all over again. (2) ICSC same store sales last week were only up 1% YoY. That is the worst YoY reading since the recovery began 4 years ago.
From Bonddad: A note on why the short-term treasury spike is so important: there is a market between companies called the repo market. It's essentially a short-term collateralized loan market where one party will essentially give a second market a specific amount of treasury bills in exchange for a short-term loan. For example, company A needs $10 million because of an unexpected cash short-fall. They're a large company who just happened to run into a short-term cash crunch. But while they may be short on cash, they do have Treasury Bills as part of their cash management strategy. So they give $10 million of T-Bills to a second party who essentially makes a collateralized $10 million dollar loan to the first party. 30 days later, Company A has sufficient cash on hand to repay the loan, so they do so and get their $10 million in T-Bills back.
Here's the rub: this transaction which is incredibly common and a bedrock of modern treasury management requires a "riskless" security to perform. Enter the T-Bill which is backed by the full faith and credit of the US government. The T-Bill makes this a routine and standard transaction. But remove the riskless nature of the T-Bill and you've got big problems in the financial world as this market grinds to a halt, making short-term lending impossible. That completely cripples trade and commerce, and that is why this situation is so deadly.
From Bonddad: Krugman as a link to a Macroadvisers report which shows that since these budget shenanigans began we've lost GDP.
Senate is taking the lead in budget negotiations.
Here's a piece on XE on the already negative impacts.
Warren Buffet Calls it like he sees it: this is "asinine."
Senate is real close to a deal:
Top aides to Senate Majority Leader Harry M. Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) are working to finalize plans to raise the debt limit through Feb. 7 and end the 16-day-old government shutdown, after a House Republican effort to forge a solution collapsed Tuesday in humiliating failure.
“We are getting real close,” Sen. Charles E. Schumer (D-N.Y.) said just before 11 a.m., as Republicans began to enter a meeting at which they were expected to finalize the plan.
As of 12:21 CST, the markets are still rallying. The SPYs gapped higher at the open and then continued to move up, eventually peaking at 172. Since then we've seen a slight downward consolidation, but not a panic sell-off.
In addition, it appears the Senate has a deal:
Senate leaders announced last-minute agreement Wednesday to avert a threatened Treasury default and reopen the government after a partial, 16-day shutdown. Congress raced to pass the measure by day's end.
The Dow Jones industrial average soared on the news that the threat of default was fading, flirting with a 200-point gain in morning trading.
"This is a time for reconciliation," said Senate Majority Leader Harry Reid of the agreement he had forged with the GOP leader, Sen. Mitch McConnell of Kentucky.
One prominent tea party lawmaker, Sen. Ted Cruz of Texas, said he would oppose the plan, but not seek to delay its passage.
Now we move on to the House, where the results are anything but certain.
Treasuries are also rallying in anticipation of a deal. From the FT:
It's not just stocks that are rallying as confidence grows that Congress will pass a deal that removes the possibility of a US default.
US government bonds are, too. The yield on the ten-year note fell 8 basis points to 2.67 per cent, echoing gains for longer and shorter maturities.
Above is a 15 minute chart of the SPYs, which covers the last six trading days. What's really interesting is how remarkably calm the price action is. We see the big candle up on October 10th and the sharp drop at the open on the 14th, but aside from those events trading has been remarkably calm considering the Washington situation.
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