StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



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  • Must-Read: Bruce Bartlett On The Debt Limit   23 weeks 6 days ago
    No

    It's uncertain whether there will be sufficient revenues coming in on October 31 to meet just the interest payments due that day, and it's very much certain that there will NOT be sufficient inflows on November 15 to meet the interest payments due that day. So your "plan" would require NOT making payments to mandatory budget items even on days when there was sufficient cash on hand to make them, in order to save up for interest payments in the days ahead. Also, while interest payments may be a relatively small % of the budget, when combined with Social Security, Medicare, and National Defense, it amounts to around 75% of the total budget. There simply are not that many other things to "not pay" in order to save up for an upcoming interest payment.

    Payment prioritization is a complete non-solution that, as I said above, at most buys an extra couple of weeks.

  • Must-Read: Bruce Bartlett On The Debt Limit   23 weeks 6 days ago
  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 2 hours ago

    there is a difference between "can't" and "don't want to"

    i go back to the Bureau of Public Debt Strategic Plan. they say they have a recovery plan to keep issuing and paying debt no matter what - i suggest they execute it.

    on the three payment systems: they are supposedly a BPD system that feeds fedwire, a DOD system, and a third system that pays the rest.

    http://www.businessinsider.com/can-the-treasury-prioritize-payments-if-t...

    i suggest step 1 to avoid a debt default is to keep the BPD/fedwire system turned on. to help out on that, in the house CR the republicans allowed that debt interest be exempt from the debt ceiling (section 138)

    http://www.gpo.gov/fdsys/pkg/BILLS-113hjres59eh/pdf/BILLS-113hjres59eh.pdf

    i was surprised that democrats took 138 out of the senate bill when they are supposedly so concerned about a debt default.

    it's just nonsense that debt interest can't be prioritized when: it is less than 10% of total revenue; there is a completely separate payment system; BPD has a business continuity plan; the republicans have offered to exempt interest from the debt ceiling

    as for what is paid and what is not: that's going to be negotiated with the republicans; if democrats want to get away from the immediate balanced budget requirement they are going to have to make some concessions

    ** the quote refers to a statement made by the character of the Sheriff of Nottingham who was cowering under the banquet table while Errol Flynn was tearing up the castle in the Adventures of Robin Hood

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 3 hours ago

    So I am not quite sure what you really mean to do here. The securities in the SS Trust fund are US treasury bonds purchased by the trust fund. How would the Treasury get their hands on them in the first place? They don't have the money to purchase them (even if that were allowed; this is what the debt ceiling means), and for them to be loaned (if that were allowed) would presumably require the permission of the Trustees. Conveniently, that board does include Secretary Lew and Secretary Sebelius, but there are four other members, two of whom are acting (due to vacancies at Labor and the SSA Commissioner) and two who must be appointed and Senate confirmed. (And those trustees slots were vacant for three years before being filled the last time.)

    So if I am right about this, even if it were legal, it would almost certainly be politically impossible, since if somebody tried pulling that stunt, I am sure the Senate would fillibuster replacements for Labor, SSA, and the two appointed trustees (we need two more for FY2015, which is not that far away) and the stunt would become an issue in the mid-terms.

    Oh yeah: the Fed would have to go along, too. I really don't see that happening, since there is just too huge an incentive in doing this the "right" way. And you know there would be a lawsuit instantaneously. I think this is even less probable than minting platinum coins.

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 6 hours ago

    1) The Treasury actually hit the debt ceiling back on May 19, and has ALREADY been using extraordinary measurures to keep payments flowing.

    2) The Treasury has no legal authority to prioritize payments, and the law requires them to execute all appropriations. In recognition of this fact, the House recently introduced a bill authorizing the WH to prioritize payments but the bill did not pass.

    3) The Treasury processes 80 million invoices per month across at least 3 different systems and the systems are set up to automatically pay on the due date, to prioritize you'd have to manually override each one.

    Now let's be clear - October 17 probably is NOT the drop dead date. It's likely (though not certain) that the actual date when they run out of cash is October 22. The next interest payment is on October 24, on an issue of maturing T-Bills, but it is a small one of around $60 million or so. On October 31, there is an interest payment of around $6 billion due. On November 1 there is a huge payment of around $58 billion in Social Security, Medicare, and military salaries due. The next interest payment after that is November 15.

    If the debt ceiling is not raised, it's unlikely we make it past October 24. If by some miracle we do, then how do you, as a "prioritizer" handle the next week? Let's be clear, you're arguing in favor of not paying seniors on Social Security and not paying soldiers fighting in Afghanistan, so that interest payments can be made and almost half of those interest payments go to foreigners including foreign governments. Is it politically feasible to prioritize Chinese businessmen over US combat soldiers? And of course, let's not forget that the interest payment is actually due the day BEFORE the big SS/Medicare/Military payment, so it looks like you'll need to reverse the laws of physics as well. Finally, what do you think the financial markets will be doing while all this is happening?

    The people making the "Treasury can prioritize payments" argument have not thought their position through at all. Even if it were possible, which it isn't, it would likely only buy them 1 week and certainly could not buy them more than 2 weeks.

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 1 day ago

    so Bartlett and Secretary Lew claim that the Treasury can't prioritize.

    That's interesting, because the Bureau of the Public Debt in their "Strategic Plan" claim that they have a business continuity captability that can cover: terrorism, epidemics, natural disasters and cyber attacks (page 14)

    http://webcache.googleusercontent.com/search?q=cache:H82svIdZrNQJ:www.pu...

    http://www.publicdebt.treas.gov/whatwedo/bpdstrategicplan09-14.pdf

    so the full faith and credit is good in case of nuclear war or a smallpox outbreak, but prioritization is not possible ?

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 1 day ago

    And the latest is some oddly qualified 6-week debt ceiling raise is the next try. So the market celebrated today, but it is not clear to me that this will work, either. And the shutdown is explicitly being left out of the mix.

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 2 days ago

    Yes. Government budgeting is _exactly_ like your own household spending and bank account. Absolutely _no_ _one_ over the last thirty-five years ever thought of this simple-minded and wrong-headed analogy. You are the first.

    Please, spare us.

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 2 days ago

    The Bureau of Engraving and Printing prints money, and it is a Treasury department, but that's a really small detail; only a very small sliver of all the US Dollars in existence exist as paper. So set aside the phrase "print money" for a moment.

    The Treasury cannot create new US Dollars, in the sense that a guy in the US Treasury can type "$500" into a computer and then pay an invoice with it. Every dollar that leaves the Treasury must be matched to some dollar coming in, just like any other organization.

    There IS an organization in the US Government that can create US Dollars, but it's the Federal Reserve, not the Treasury. Someone at the Fed can in fact enter a number into a computer, and cause more dollars to leave the bank than have come in; they do this through a bunch of different mechanisms, normally by paying a certain amount of interest on loans, but lately they've been doing Qualitative Easing, which is plainly buying financial assets off the open market (like bonds) and giving the seller dollars which have been created from nothing.

    The Fed can't do this arbitrarily, it has a process directed by the Fed Board of Governors, which is composed of (mostly) bankers. They are, by law, forbidden to take into account the financial condition of the Treasury when they decide how much money to print; they are only supposed to care about the stability of the dollar's value, and the level of national unemployment. The people who participate in the Fed decisions are supposed to be key stakeholders in the health of the economy, and take action accordingly to protect themselves. That's the concept, anyway.

    SO, the short answer is that the Treasury cannot pay its debts with created money; people have to give the Treasury money through taxes. The Fed COULD give the Treasury money by buying some THING of some kind from it, like some sort of instrument that could appear on the Fed's balance sheet but not the Treasury's, but this would have the effect of making the Fed a fiscal authority and not merely a monetary one, the legality would be questionable and it would pierce the very boundary between fiscal stability and monetary stability that the Federal Reserve Act created.

    I think, I'm no expert.

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 2 days ago

    I say, cash out, short out and hope for a crash. Remember, money doesn't go away, it just trades hands. The reality is, we have been living in a trade deficit, debt fueled fantasy economy for over 30 years now. Too bad Reagan didn't put his money where his mouth was, or all the rest that followed as for that matter. Their only saving grace was the fact that interest rates went to 14% in the early 80's to combat inflation, so the FED always had the luxury of dropping rates to restart a slow economy. But no more, and QE has so many adverse affects, it makes you wonder if it's worth it. We need a big correction in trade policy, wages (including govt. jobs) and prices, then millions of jobs will come back to the USA and we can all start over again, hopefully right next time. Or else, we get to do this every year, and it's going to get worse. Just wait till rates go up.

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 2 days ago

    What to do when you are in debt? Google it an get common sense.
    - stop borrowing
    - negotiate your debt
    - make a budget
    - pay your bills.

    what are not doing these activities.
    in fact we are on steroids going the opposite way on all four of these.

    i have no debt, and i work hard, i save for the rainy day that is coming because you don't do these 4 things.

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 3 days ago

    Seriously, their coverage of these topics is pretty good and better referenced than anything you will see in blog post comments even in such an exclusive and high class blog as this one.

    But briefly, Treasury can mint coins, and the Fed prints bank notes. And in the situation discussed here, neither is directly relevant since what the Treasury's problem is a lack of borrowing authority to cover the checks it is going to be writing in late October, since it is essentially out of cash and income will be exceeded by expenditures. And it must by law write those checks.

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 3 days ago

    Listen homies. Breaching the debt ceiling is not the end of the world. I know it, because I am from Argentina and I was there when they defaulted and Argentina is still there. Well, sort of...Question is, do you want to get closer to the std of living in Argentina....

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 3 days ago

    The special trust fund securities are not marketable, but are they hypothecable? It's a crazy thought but these are crazy times. Could they be repoed to the Fed for funds needed to make social security payments while the debt-ceiling standoff continues?

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 3 days ago
  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 3 days ago

    You've failed to grasp what Bartlett means by calling the debt ceiling redundant. This was just one of our clues that you're not that bright.

    Among others, the notion that "Wall Street types" is somehow a discrediting epithet in this context; the notion that sequestration, which has had an adverse economic effect while lowering the deficit (which probably escaped your notice), can be adduced for making predictions about something entirely different; the notion that presidents are who control the level of structural debt; the notion that a meaningless vote not to raise the debt ceiling is the moral equivalent of a meaningful vote not to raise it; and by no means least, the completely idiotic notion that it's "fiscally responsible" to threaten default to get one's way (and relatedly, the notion that default wouldn't be so bad).

    Time to grow a brain.

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 3 days ago

    That was facetiuousness from one of gazillions of mispellings on tea party signs...

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 4 days ago

    Would you explain the mechanics of how the Treasury works. It has the authority to print money. What's to stop it from printing money it needs to pay its bills?

    Alternatively, what's to stop the FED from giving the Treasury "overdraft protection," which would work as if it were debt but which is not formally agreed to as debt?

    I agree that the whole thing is a serious (stupid, and unnecessary) issue, but I'd like to know more about the mechanical details of how it works.

    Thanks.

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 4 days ago

    They do not actually call it that, but, I think this name follows from understanding what this Committee can and cannot do:

    http://docs.house.gov/billsthisweek/20131007/BILLS-113hr-PIH-bicamwrkggr...

    A quick read suggests this is just like the Super Committee, except:

    1. There is no statutory time limit for the committee (not that it matters)
    2. The committee's recommendations have no binding authority.
    3. Any recommendation requires a majority of the majority party members from both the House and Senate.

    It is not clear to me that you could come up with an idea less likely to accomplish anything quickly even if that were your goal. So I am beginning to think that the House is feeling no real sense of time urgency here, and unless there is a rapid reversal of opinion from the Speaker (and there could be, for sure), we could end up crashing through the October 18 deadline.

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 4 days ago

    I wanted to say that I am not sure if anyone that disagrees bothered to find out who Bruce Bartlett is, but so they know, he is a specialist on supply-side economics and was an adviser to Reagan, as well as a treasury official under H.W. Bush.

    This guy isn't a left wing nut job, he's a conservative.

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 4 days ago

    I believe you may have meant "morons" ...

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 4 days ago

    You lack a fundamental understanding of what, if anything, you just read.

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 4 days ago

    Seriously.

    This is what we're dealing with.

    Mr. Bartlett writes an exhaustively researched and sourced explanation and some "moran" (I don't want to insult actual morons, who aren't that stupid) figures his rant filled with Fox News/Limbaugh talking points is supposed to persuade anyone.

    Actually, if anything, it's evidence that the Tea Party is, indeed, enormously ignorant to the point that it's a reliable rule of thumb to do the opposite of whatever they say.

  • First Week Of Great Shutdown of 2013 Went Exactly As Boehner Wanted   24 weeks 4 days ago

    I have to admire your optimism. Yes, we still have a good chance that a debt ceiling increase will happen. (As long as the shutdown is still going, to give the Speaker something to distract the radicals with.)

    But the shutdown itself, especially after the debt ceiling increase, is going to run at least a couple of months. It will take that long for any significant portion of the radicals' supporters to move from "Hey, the government shut down and the sky did not fall" to "Wait a minute, this shutdown is hurting me!" Not a couple of weeks; a couple of months.

  • Must-Read: Bruce Bartlett On The Debt Limit   24 weeks 4 days ago

    The debt ceiling is a made-in-DC circus, a conspiracy among the media and the 2 major parties.
    Barry voted against raising the debt ceiling when he was a 3-year-senator-who-sent-caucus-organizers-to-Iowa-the-day-after-he-won-his-Senate-race.
    Now he's in the White House and wants the GOP to raise the debt ceiling so he can put on another $6 trillion in national debt.
    Bartlett quotes a bunch of left-wing academics and Wall Street types.
    Big deal.
    These are the same folks who ferociously opposed the sequester.
    Remember the sequester?
    It was to have been the end of the world.
    Look out the window.
    It's still there.
    The GOP have played along with the Demagogues for years, condoning and/or contributing to deficit
    spending for decades.
    If the GOP continues doing so, they must be destroyed and replaced with a fiscally responsible party.
    Mr. Bartlett speaks:
    "That is an argument that may have been salient before enactment of the Budget Act of 1974, which requires Congress to examine aggregate budget trends on a yearly basis. Therefore, I believe the debt limit is simply redundant in that sense."
    Ha! $16 trillion in debt.
    Oh, excuse me, Professor NoBell says "the debt doesn't matter."
    Right.
    And when interest rates return to normal levels, the interest payments won't matter.



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