A Preview Of The Next Debt Ceiling Crisis

As of Friday, total US debt subject to the limit was $16.006 trillion, or $387 billion below the latest and greatest official debt ceiling. In the past 3 months the US has been raising debt at a slower pace than usual precisely for this reason. Debt issuance will now pick up at far faster pace as the trendline mean reversion reasserts itself. It means that sometime over the next few months, and certainly before the end of the year, the US debt ceiling will be breached (with all the usual tactics employed to delay this event from happening as much as possible, including resuming the pillaging of various government retirement funds) as the Treasury itself warned. It also means that either just before or just after the presidential election, the topic of the debt ceiling will be once again upon us. As a reminder, the reason why the market plunged back in August of 2011 is because as the GOP proved unwilling to compromise, suddenly everyone, led by Tim Geithner, realized just how close to a failed auction, read endgame, the US was, and the dire need for a wake up call became paramount. Furthermore as is well-known, the only stimulus Pavlovian politicians react to is a market collapse, which not only instills the fear of the "401(k)" god falling to earth, but lights up the switchboards as concerned "voters" suddenly realize that all their mark-to-Bernanke's market "wealth" may disappear in a puff of smoke. It is now, courtesy of Bob Woodward, that we learn just how close we came. And since the polarity and discord in Congress after the election, already at record levels, will soar to new all time highs after November, it is safe to say that the debt ceiling debacle deja vu is coming, and this time it will make the first one seem like child's play.

Dr. Evil Speaks Again – George Soros: Germany should back “growth” or leave euro

Germany should leave the euro zone if it is not prepared to take a more decisive lead in helping the euro zone’s weaker nations escape a spiral of increasing indebtedness and economic decline, financier George Soros said.
from The Telegraph:
Soros said Europe faced a prolonged depression and an acrimonious end to the European unification project if steps were not taken to help its southern nations grow their way out of the debt crisis by collectively assuming some of their debt and relaxing its German-led insistence on austerity.
“Germany should either lead in developing a growth policy, political union and burden-sharing, accept the cost of leadership, or leave through an amicable arrangement,” Soros told Reuters in an interview with Reuters television in Vienna.
Soros, a liberal philanthropist who rose to fame as an investor on a big bet against the British pound in 1992, said a Germany-free euro zone could be more competitive in exports and service its debts more cheaply with a weaker, France-led “Latin” euro.
Read More @ Telegraph.co.uk

Five Years Since The Great Financial Crisis: "No Growth, No Deleveraging"

One of the populist buzzwords of the past 5 years, particularly in Europe, has been "austerity", which as we have said for the roughly the same past 5 years, is simply a synonym for "deleveraging" but one which carries just the right amount of negative connotations, and is used by crafty politicians to shift blame from their own failure to enact proper policy (which over the past 30 years has merely meant to borrow growth from future political cycles, aka, issue debt) onto a "technical" word conceived by Ph.D.-clad economists, who too, are looking for a passive victim on which to project their failure of enacting a voodoo economic theory. There is one problem with all of the above. As we have also been saying for the past five years, the austerity deleveraging myth is one big lie. We are setting the record straight below with facts and figures. We would be delighted if some politician, somewhere, could disprove these facts, which essentially imply that the world is now in a global recession, having experienced no growth as the recent 100% contractionary PMI print of all major economies confirms, yet without any country actually having implemented austerity, pardon deleveraging to have at least a modest justification for this failure of growth.

The Bill Clinton Myth

Earlier this week, former U.S. president Bill Clinton gave the keynote address to the Democractic National Convention in an effort to lend some of his popularity to Barack Obama.  With the unemployment rate still stubbornly high at 8.1%, Obama has lost many of the enthused voters who put him into the Oval Office in 2008.  Clinton was tapped to deliver the speech not only because of his image of a wonkish pragmatist but because of his presiding over the booming economy of the late 1990s.  Like a prized mule, Clinton was dragged out to give Democrats someone to point to and say that his policies were the hallmark of smart governance.  Today, Clinton still takes credit for Greenspan’s manipulated boom.  His supporters on the left love nothing more than to point at his presidency as vindication of the backwards theory that higher taxes equal more growth.  Clinton wasn’t a policy wonk; he was a politician who dipped into the Social Security trust fund to give an appearance of balancing the budget while the national debt still climbed higher. Through all of his financial scandals, womanizing, aggressive foreign policy approaches, and possible cover ups, it is actually fitting that Clinton is still looked to by the political establishment as someone worthy of respect.  He is representative of F.A. Hayek’s timeless lesson: in government the worst rise to the top and state power corrupts.

Asia: If You Talk To Businessmen, Business Has Definitely Slowed Down Considerably

Admin at Marc Faber Blog - 2 hours ago

(In) some countries, you know, like vietnam car sales are down 40 percent, steel production or steel usage is down 40 percent from the peak a few years ago. So we have in some countries already a meaningful slowdown and by and large if you talk to businessmen, business has definitely slowed down considerably. - *in CNBC * *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

Small Business and Macroeconomics

by Vedran Vuk, Casey Research:

When anyone talks about macroeconomics and the boom/bust cycle, they more often than not focus on the big picture: GDP growth rates, inflation expectations, and central bank policies. In most of my articles, I am as guilty as anyone else of this. So today, I want to switch it up and discuss the boom–and-bust cycle from the perspective of a small business. How is that a period of low interest rates and excess credit can cause such widespread destruction among enormous banks as well as small businesses? After all, it’s not like Mom and Pop were playing with risky derivatives.
Suppose I was starting a new business during a credit bubble. Let’s say that it’s something somewhat bubble-related, perhaps a high-end kitchen accessories store. Since I’m a very prudent person, I’m not just starting my business on a whim. In fact, I’ve done some serious calculations to discover that my monthly profit margin would be about 20%. It’s not huge, but enough to start my small, high-end kitchen accessories store.
Read More @ CaseyResearch.com

On the Fed and WFP

by Bruce Krasting, Bruce Krasting Blog:
The most disappointing element of Friday’s NFP report was the drop in Work Force Participation (WFP). This important measure of the labor force fell to a 31 year low. A look at the details shows that things are even worse than the headline report. Consider this chart of WFP for two groups; workers 22-55 (white) and those 55+ (brown). The lines crossed in 2002. The negative gap has widened every year. It’s fallen off the chart the past three years.
This chart describes a real crisis for America. The long term consequences to the economic health of the country are tied up in this chart. All long-term macro economic analysis of the USA assumes that the current crop of younger workers will evolve to be a productive group for the rest of their lives.
The hope belief is that the younger members of the sub 55 group will have babies and buy houses. As they prosper, GDP will grow, tax revenues will rise. The younger workers of today have a very big burden on them. In future years they must generate tax revenue for Washington as D.C. has made very big promises on Social Security and Medicare that can’t be met unless this crop of workers succeeds.
Read More @ BruceKrasting.blogspot.com

Co-ops are now employing more people than corporations

by J.G. Vibes, Activist Post
As I have been covering in my shows and articles over the past few months, the economic and societal changes that are taking place all over the globe are much less of a collapse as is often described, but more of a transition. It is true that an old way of life and all of its trappings are disintegrating into obsolescence, but this is only the beginning of the story.
There have been a few who have pointed this out, but until now our assertions have been based purely on speculation from researching history and wishful thinking. Not to discount the importance of historical knowledge, but it was difficult to find signs that could be pointed out to show where exactly this transition may be leading.

However, in the past year, and especially in recent months, information has been emerging that is at least starting to show what the path looks like. As I have expressed in many previous articles on Spain’s time banks and decentralized currencies in Greece, in some of the areas that are getting hit the hardest, there has been a natural ability for people to devise ways to replace the collapsing system with a more user friendly alternative.
Read More @ Activist Post

The one thing nobody’s talking about…

by Simon Black, Sovereign Man :
One of the unequivocal laws of the universe is that governments tend to screw up everything they try to do. When life gives them lemonade, they make lemon laws. Even if grounded in good intentions, all they know how to do is blow other people’s money and pass destructive new regulations.
In fact, I can only think of two institutions on this planet that have a more dismal long-term track record than government. The first is whoever ends up playing the Harlem Globetrotters. The other is central banks.
Presumably, the role of a central bank is to manage a nation’s money supply in order to smooth out booms and busts, and maintain a sound currency. But one need only look as far as the European Central Bank’s short 14-year history to get a sense of this massive failure.
The single currency is now being crushed by Himalayan mountains of debt. The ECB’s solution? Conjure hundreds of billions of euros out of thin air to buy this debt, from which they’ll most likely take a huge loss. In doing so, they enable the most indebted eurozone nations to go even deeper into debt, more conveniently, at lower interest rates.
Read More @ SovereignMan.com

The ECB Waves Its Magic Wand

by Pater Tenebrarum, Acting-Man.com:
ECB Bazooka Unwrapped – Another New Acronym Is Born
Irish finance minister Michael Noonan once quipped that all that was required to circumvent the legal restrictions faced by the ECB regarding the implementation of a ‘QE’ type policy was for ‘someone to come up with a clever formula’.
“From our perspective, we see how the Bank of England operates, and we see how the Fed operates, but I understand it’s not legally possible for Frankfurt to operate in the same way,” said Irish Finance Minister Michael Noonan as he arrived at yesterday’s meeting.“So we’ll have to see if somebody has come up with a clever formula to allow that.”
(emphasis added)
This was uttered in late November of 2011. In an interview he gave to RTE Radio in Dublin earlier the same month he had already specified what exactly he had in mind:

„The ECB needs to “go into the market and say ‘We have a wall of money here and no matter how much speculation there is, we’re going to keep buying Italian bonds or any other euro bonds that are threatened.”

Read More @ Acting-Man.com

Canada: Selling Its Soul to America

by Stephen Lendman, SJLendman.Blogspot.com:
Canada is more colony than sovereign state. Canadians perhaps wonder when it’ll grow up, act like an adult, and regain its rightful independence.
They’re also worried about a country junior partnering with imperial America, Israel, and other rogue NATO allies.
A previous article said the following:
On September 7, Foreign Minister John Baird said Canada closed its Tehran embassy. It expelled Iranian diplomats in Ottawa. They have five days to leave. He claimed a nonexistent Iranian threat. He took a page from AIPAC’s playbook. He bogusly called Tehran the gravest threat to global security.
He accused Iran of “providing increasing military assistance to the Assad regime.” He ignored Washington’s war Syria. He said nothing about Canada’s role.
He didn’t explain how America, rogue NATO partners, and regional allies recruit, arm, fund, train, and direct ravaging death squads. He was silent on what matters most.
He recited a litany of lies about Iran. He unconscionably pointed fingers the wrong way. Canada is a committed imperial partner. It’s one of 28 NATO countries. It supports the worst of Israel’s crimes.
Read More @ SJLendman.Blogspot.com

Donations help maintain and defray the operational costs. Paypal, a leading provider of secure online money transfers, will handle the donations. Thank you for your contribution.

I'm PayPal Verified