Interesting. I read somewhere that the banks are quietly selling their treasury notes, so that may be why they aren’t as worried and thus aren’t providing direction to their minions in DC.
They seem to think they’ll make a pile off the default and Eric Cantor seems to think so as well.

Jane, you’re feet must be sore from all the walking the talking you’ve been doing the last several days. Literally.
I don’t have any answers, but I will recommend a good epsom salt soak for your feeties.
Thanks for all you do. You inspire.

PS: leave it to Obama to scare old, sick and disabled people.
If he can find a way, he’ll probably WON’T send out the checks. Legality means nothing anymore in that corrupt swamp.

DC was really built in a swamp you know. It was very unhealthy for the employees there for awhile. I guess they’ve cleared up THAT little problem of malaria and yellow fever… or… maybe not

My cynical side likes #2, Jane. But seriously; will they lose on a default of a day or two? That’s the point at which Obama can claim he will take any hideous deal he claimed to abhor before…in order to restore faith in our debt. I’m not altogether sure I believe Moody’s et.al.’s warnings about a credit downgrade aren’t just theatrics, too.

Too easy to be suspicious these days.

It may well be that the banks just stayed out of it for too long thinking everything would be fine, and now the game has taken on a life of its own, and intercession is impossible.

This is my guess. To a banker, the concept of `risk free return’ is what the gravitational constant is to a physicist or Avogrado’s number is to a chemist. Until the last few days, they were probably assuming the debt ceiling follies were all smoke and mirrors, and a rabbit would be pulled out of a hat at the last minute. Now that that isn’t happening, it may be too late for them to intervene.

Wendy, if you’re referring to

The banks want to force Bernanke into some kind of mini-QE3 to send out Social Security checks, because that will be very very good for Goldman Sachs. In which case Judd Gregg should definitely go to jail.

I vote for #2 as well.

Well it might be time for a false flag, whip the public into a frenzy and put the money printing press on hyper drive

I should be upfront and say I would be a bear if I had any money to bet against any bonds. I would short US Treasuries as hard as I could. It looks like some of the big bond trading houses (same as “TARP banks”) are selling heavily right now.

Treasury yields on 7-, 10- and 30-year notes & bonds are spiking this morning by six or more basis points (bp); the 5-year yield is up by 4.9 bp.

What does that mean? Bond holders are selling so prices are falling so the fixed amount of the interest payment on each bond (“fixed income” or “fixed coupon” bonds) is a bigger percentage of the price. IOW, when the denominator (bond price) falls and the numerator (fixed coupon) stays the same, the fraction gets bigger. Thus, yields go up.

Bloomberg does not give volume data to cheapskates like me who don’t subscribe, so I don’t know if bond holders are actually “dumping” U.S. Treasuries right now, but they are selling in sufficient quantity to affect the yields by 5-6 bp.

For the same reason, the stock market averages are jumping: Dow, S&P, FTSE and DAX averages are all up more than one percent.

But that always happens when Treasury yields spike: the high-speed computers take money out of Treasuries and stuff it into stocks. It was called “disintermediation” in the text books when human investors were doing it back in the dark ages of the 1980s, although I have no idea what the high-frequency programmers call it these days. But it’s entirely routine to see Treasury prices fall when stocks go up and Treasury yields go up at the same time that stock prices go up.

anyone see cenk’s video on why he left MSNBC. apparently people in DC were complaining about him and he was not being a part of the establishment. No shock there. Caught a little Propaganda Jo this morning where all the guest hosts were talking about the need to cut SS. They love showing polls that show majority of americans want to see both cuts and tax raises. How about they do a poll where they ask how americans feel about those cuts coming out of SS and MC?

Look at the two updates at the bottom. #2 is setting my spidy senses off. Too much talk about social security checks, which they legally can’t fail to either a) send or b) honor.

The other thing that’s not being whipped: The gang of 6 deal by the White House. As one Senate insider said to me: “If the White House supported this, don’t you think they’d be calling and twisting arms?”

Of course, the other possible explanation for that is that Bill Daley just isn’t Rahm Emanuel, and doesn’t have either the relationships or the ability that Rahm had on the Hill. Daley spends his time trying to crush the left, so I guess that doesn’t leave many hours in the day to work with Congress.

The White House basically set up the Biden group to undermine the Gang of 6. So everyone is scratching their heads and thinks weird for them to swivel around now and support it.

And then there’s the fact that if Obama says he will take a temporary extension after walking out of the room when Eric Cantor suggested it 3 times, that’s a huge victory for Eric Cantor. How they did not see that coming down Sepulveda is anyone’s guess, but they are driving right into it at the moment.

It’s a complete mess. And anyone who politicked this debacle would be fired immediately in any competent organization.

And what’s with this business of disaster if Moody’s downgrades the USA triple A rating. The media warns of that catastrophe, but none ever murmur a word of Moody’s criminal culpability in the 2008 economic collapse–when Moody’s took millions from the banks to vouch for those Mortgage Backed Securities as AAA when they knew they were crap….

So, why doesn’t Obama tell his Justice Department to tell Moody’s if they dare downgrade the U.S., they’ll send regulators and the FBI into Moody’s headquarters and arrest all its officers for collusion with the banks in securities fraud….

It seems inconceivable that they won’t pass some heinous piece of crap at the last minute and avoid default.

Yet the utter inability of 535 people to write “the new debt ceiling is $XYZ” on a piece of paper and vote on it when they have several months to do so would demonstrate just how disfunctional our government is.

This society is collapsing.

Everyone acknowledges that the banks will lose a lot of money in the event of a default

why/how would the [tbtf] banks lose a lot of money?

Companies are hoarding cash. Apple, for instance, is sitting on over seventy billion. There has been a huge wealth transfer the past couple of years to the private sector, as they continue to lay off people, reduce expenses and hold onto money. The situation seems different from a couple years ago, when liquidity was the big issue. I think these banks are testing the case that they are more important than the country. What if the country failed and the banks did not? A hundred years ago that was true. JP Morgan saved the country, when the Treasury was not powerful enough. Only this time they might not save us.

The “meeting” with the Democrats yesterday has me worried. It feels just like health care reform all over.

Here’s a possibility that you missed.

The banks know the democrats will fold and give the republicans whatever they want as long as the republicans hold their ground.

Writing about that now.

My hunch about the banks’ silence is simple: the debt ceiling has graduated into emotional, radioactive politics, and has become bigger than life.

The banks, whatever they think about that ceiling, will think first about what their divided customer base thinks. Especially nowadays banks have a paranoid aversion to any more controversy — publicly barging in there is a no brainer.

Good reporting, Jane.

My explanation:

We have the stupidest elite class in history. They are so greedy they don’t know when they are killing the golden goose.

Here is how the Social Security checks don’t go out. The fund is available, but the funds for the IT people to send them out are not. Most likely it is a contracted service. And…they are not canceled, just deferred until there are funds to the the IT contract.

The 14th amendment requires the President not to default even if Congress shuts down. (And vice versa for the other branches of government.) But there are other amendments that the branches of government have outright broken. All Obama can do with the 14th amendment is say that it gives him the power to decide what bills get paid and which are deferred. Of course, my preference is that the first thing he does is defer the salaries of elected or appointed officials over the median family income. That includes the Senior Executive Service and the military brass. And then look at which military research and procurement contracts can be deferred. And only then look at what operations need to be curtailed.

Unlike a shutdown that occurs because Congress has passed neither the appropriation bills or a continuing resolution, there is money authorized to pay all government operations until September 30 (if they haven’t gone over budget, which knowing civil service managers they likely haven’t).

The real legal hit on Social Security comes in the deferral of any interest payments back into the Social Security Trust Fund, but this is an accounting item which becomes a problem only if it is never paid back.

The banks and corporations that have stashed profits overseas are lobbying. See my latest Diary or hop over to Rolling Stone for Matt Taibii’s take on it. This has been brought up many times over the years but never gained much traction.

Another thing; the banks already own most of the Congress, especially the Senate.

So without issuing instructions, it’s a cheap way to vet the worthy employees who will do what the Banks want, so the Banks know who to keep and support in 2012.

So who are the counterparties to all those software-generated trades? Other algorithms that take contrarian positions?

I think you’re onto something. Good point.

I have seen arguments for both sides on whether Social Security is a debt that has to be paid out. A recent diary here said that there are court cases which suggest Social Security can be changed or altered at any time, that these are not binding promises. Is it settled law that the checks have to go out?

Maybe he should try Rahm’s famous swearing shower scene?

Yup; or a variation. And maybe some help for BoA; Bernanke said a month ago that he had no more rabbits to pull out of his hat; then told Congress last week he might pull a few out. Christ. Who is that man?

But one thing we do know: he is to the left of Obama on all this; begging for a stimulus package and fewer spending cut.

It seems inconceivable that they won’t pass some heinous piece of crap at the last minute and avoid default.

have to manufacture a faux crisis in order to implement the “solution.” shock doctrine in the service of the predator state? or something….

possible this one is getting out of control though. if so, could be a big shock to the global financial economic systems. :(

Jane, having admitted that I am a bear, and that I think Treasury prices will be hammered because of stupid U.S. govt tricks, I do not agree with you about this:

The banks well know that things are so fragile that a Lehmans II could take the whole place down.

I wish it were true, because I truly want nothing more than to see large numbers of banks collapse and large crowds of thieving bank execs go to jail. But Lehman Bros. was a bankruptcy; it is being “resolved” quite smoothly in a chapter 11 “reorganization.” In the few days after LEH filed chapter 11 in September 2008, a massive quantity of bond insurance on Lehman bonds was settled through an auction under ISDA rules. Whatever losses resulted for those who did not have bond insurance were absorbed.

The new Dodd-Frank law makes “resolution” procedures for huge banks even stronger. Sheila Bair very convincingly (to me) argued that resolution is entirely manageable even for gigantic money-center global banks. The U.S. could easily “resolve” several of those asshole banks at the same time with barely a ripple in the real economy, maybe a small burp in the commercial paper market. At least two of the big names are insolvent right now. Morgan Stanley (not one of the two I’m referring to) just declared a huge loss of $558 million for Q2 and its stock prices is going up!

The key point is that “Lehman Bros One” did not cause the credit meltdown, the credit meltdown caused Lehman Bros to fail. IOW, the commercial paper market froze, and LEH was caught with its liquidity pants down. I don’t think a U.S. default on its Treasury bonds will cause the commercial paper market to collapse. A default will certainly change the prices on Treasuries but it would not necessarily kill the liquidity in that market. There will still be plenty of Treasuries to buy & sell, there is no reason why a drop in prices for Treasuries would cause a “liquidity freeze” like we had in 2008. I don’t think the commercial paper market would go poof.

So the big bank lobbyists have been sitting on their hands probably because the risk is still low and the impact would not be catastrophic, for them.

One thing I hate is that we may never know what happened, so many have so many lies and obfuscations to protect, the Prez most of all.

The lies about the revenues are galling me in particular lately; so easy to mumble things about ‘trillions’ or ‘billions’ in (not documented) revenues; kinda like mumbling about the Trade Deals ‘providing many jobs’ for Americans. Hooey.

Bernanke opened the door for some QE3 action just last week –

link

I think Gang of Six is supposed to be the “bad cop” to McConnell-Reid’s “good cop” – and why not, it’s calls for Catfood II are much more specific than the vague allusions to it to be found in the Gang of Six proposal

anecdotally, it appears to be working – lots of tribalists see M-R as a shit sandwich, but view Go6 as a 10 course meal

Not all of DC was a swamp – but the reason the land was gifted to the Central government was that it was though not too valuable.

Indeed there was a swamp, and swamp gases and fog – which why the State Department is called “Foggy Bottom” – it is built on that former swamp

Of course there is the fog of bad thinking, but then in that case the Pentagon would have the Foggy Bottom appellation.

If they didn’t dump their Treasuries soon enough. If they sold CDS on Treasuries instead of buying CDS (i.e., if they are net long on the payout side when a credit event occurs).

Dunno. Things are very fragile in Europe right now. Even the bankers are spooked that it could spread here.

Yeah, the downgrade.

yes. Over 60% of all trading on all major U.S. exchanges is high-frequency programmed trading. Human people don’t control it anymore. Which is why human (retail) investors left the stock market casino long about …. three years ago, or even earlier.

Uh-huh, great point.

FYI, I just recently learned that MicroSoft is moving more operations to Singapore and the workers remaining at MicroSoft are moving out of the US there. Then there is this: “AT&T and T-Mobile: Jobless.” I wonder where those jobs are going?

If it comes to a government shutdown, I’d appreciate seeing the Congressional office buildings locked down, and a letter to ALL of our congresspersons and Senators saying that until a resolution to the problem has been found, all of their staffs are layed off, all of their benefits have been cancelled, and they won’t be seeing a paycheck until further notice.

“Our founding fathers” only got a salary and per diem, and nothing more. Perhaps the tea party members of Congress would like to experience that scenario for a while.

Man oh man – pols thought the August ’10 townhalls were hot; this years’ are going to be out and out riotous!

p.s. does anyone know if AARP is whipping/lobbying ?

my understanding is that treasury decides who gets paid and who does not. am i wrong about that?

Maybe he has guaranteed the tom that he has a way out. See: http://my.firedoglake.com/letsgetitdone/2011/07/20/beyond-the-debt-ceiling-the-30-trillion-plan-for-ending-borrowing-and-the-national-debt/

This was exactly my line of thinking. Who gives a toot about what Moody’s is saying. They’ve shown that they will say whatever their paymasters want. Triple A offerings that were NEVER anything but junk . . . and now they threaten to downgrade U.S. treasuries. Guess because they have the bully pulpit, and a long history of “important-speak” they still sway the markets and the politicians!

Max Keiser’s take is that the PIIGS bonds are backed by insurance from US financial firms. So if they bust, so do the big guys here. Time for TARP IV?

I’d say the Banks are trying to build plausible deniability for any blame in the ‘next’ crisis.

These financial crises are engineered, for both political and financial gain.

I’m afraid the economy will be tanked to facilitate republicans taking back the WH in 2012, if the bankers can avoid being seen as the engineers of this crisis, they have a chance of remaining MOTU.

By staying quiet now, the bankers can point the finger at the politicians when the merde hits the fan.

Since they own both parties now, it doesn’t matter who gets elected and there will be no talk of accountability because the whole plan is to blame Obummer and the democrats for the crisis and the public will accept the democrats defeat at the pols as the appropriate punishment.

Mission accomplished.

it is settled law that the Sec checks have to go out – but only if Obama Obeys the 1935 Supreme Court case – and that 14th Amendment case is the same one that leads to the conclusion that the debt limit is un-constitutional.

Of course our conservative activist judges overturn anything that gets in the way of what the corporations want – so what is “settled law” is not certain – ever – because the law is not about justice. The law protects the rich and their property and their lifestyle.

The Fed will of course backstop the TBTF. Those orgs are like two sides of the same coin.

As we’ve seen in the last year, the GOP and townhall meetings can be very hypocritical. While they cheered with joy when tea baggers party members uncivilly disrupted townhall meetings in 2008, now, when it’s THEIR townhall meetings, anyone speaking up and disagreeing gets escorted from the building as “trouble making rabble” and to heck with the video coverage.

Apparently he remembers some of basic economic theory.

Government spending and tax cuts are basic econ 101 for how to get the economy moving. Government spending is the stronger of the two since that money goes directly into the economy rather than possibly sitting on the sidelines not being utilized.

MoveOn obliged with that scare tactic. Anyone else receive the ridiculous “red alert” email about no social security checks? It looked like a spam ad for Viagra or something.

I think the purpose of saying that SS checks might not get sent was that he was trying to get the people to pressure their representatives to come to a deal.

James Kwak thinks the same thing; he asks “So What?”

“…On top of that, we all know that the short-term likelihood of default has nothing to do with the government’s finances. It’s all politics, and it’s all in the spotlight. We have thousands of politicians, reporters, commentators, and academics expressing their opinions on the likelihood of default. Every major institutional investor has its own opinion about whether the government will default next month. Moody’s has no competitive advantage in this game, so it’s just one more opinion, and not a particularly trustworthy one.

So I must be missing something. What is it?

You have to ask what part of the play Moody’s is acting out, yes?

i don’t see it. why would the ratings agencies do something to cause the tbtf banks to lose a lot of money? they haven’t shown any willingness to bite the hand that feeds them yet — even to the point of what looks like massive fraud.

Social Security checks are issued by the Treasury Department, and it’s Federal employees, not a contractor that sees that they are distributed. As you’re probably aware, MOST payments are electronic these days. But even those payments have to go through an authorization process at SSA.

Process is, roughly — SSA verifies each payee’s eligibilty (i.e. are they still alive? and have they changed banks?), prepares list of eligible payees, transmits same to Treasury, who prepares the “tape” which is then transmitted to each bank.

So this envolves Federal employees at both SSA and Treasury — if those agencies have no money due to default, the employees are not allowed to be at work. And yes, I know very well how funny saying Treasury can’t pay employees sounds.

Oh, that. I certainly agree with you that the debt explosion in the Euro zone poses massive risks to the U.S. economy, and specifically to U.S. money market funds, which own 800 billion dollars in bonds of Euro banks. Euro banks can easily absorb a Greek default, it turns out, which is why Euro Council and ECB and IMF are about to make a deal to force an effective 20% haircut on owners of Greek bonds (including their own banks) by rolling over all bonds maturing in the next eight years into 30-year bonds.

When Greece defaults, and Euro banks lose 20%, the bonds of those Euro banks will take a hit also, but not a full 20% I don’t think. The big mysteries are (1) how exposed are Euro banks to losses on CDS they sold on bonds issued by Greece, Italy, Spain & Portugal and (2) when those Euro banks eat all those CDS losses, what happens to their bond prices? How much of the $800B in U.S. money markets is vaporized when Euro bank bond prices take a hit?

But a U.S. default on U.S. Treasuries is a separate credit event. By comparison, right now, at 11:34 this morning, with Treasury yields spiking up only four and five bp on the longer maturities it seems big U.S. banks are not in a panic over the price effects of a Treasury default.

Hot off the press: History is Knocking: Join the October 2011 Coalition

The plan to blame the Democrats is falling short. The public appears to see the GOP as the unreasonable.

That being said the guys heading these companies are professional gamblers who’ve hedged their bets anyway. It isn’t like they haven’t bought vacation homes in multiple locations so they don’t have to weather any of the unpleasantries here.

I think they are all shorting, re: Eric Cantor. Also, foreign investors are probably doing the same or selling off now.

Yes, Wall Street will lose big time. However, since they are now speculating on weather and water they may not be worried. Especially since we are in a heat dome at moment!

Has anyone noticed the price of Freon lately?

I don’t want poor people to starve but the moment they decide not to send a Social Security check out is the moment the left needs to scream “where’s the working class’ surplus that we’ve paid out diligently since the 80′s?” The money they spent was not theirs to spend.

If we reform Social Security by reducing benefits or payments into it, the result is more money for folks to invest for their retirement or to pay medical and other bills.

The banks win if the money goes into private retirment accounts -high fee 401ks, soon with limited tax deduction status.

The rich win if Social Security funds are used to reduce their taxes – say, from 39% to 29%, or to maintain that 15% hedge fund “oppression”.

I think you’d have to qualify the sorts of tax cuts you’re meaning, but payroll tax cuts, or cuts that go into people’s pockets to spend; yes, but more if people feel the increase in available money.

Tax cuts to multinationals and banks, not stimulative, not jobs-creating, at least in the US. ;o)

AARP was going to have a series of town halls across the country to warm people up to the idea of cutting Social Security benefits (chained CPI etc). Our campaign put their brand at risk if they did that and caused them to back off. I consider it one of our biggest victories — taking that lobbying support money for the propaganda campaign out of the equation was a big blow. It sidelined the entire AARP effort and forced them to take a position against including any “fix” to Social Security in a debt ceiling deal. I doubt they are lobbying on that, but keeping them from lobbying on the other side was incredibly important. The only reason Medicare Part D passed was because they got behind it.

To all the people who got upset about the “burn your AARP card” campaign — “oh, you’re being so mean to poor AARP” — stop being sheeple. You have two choices. Get used to playing hardball with the corporate interests that control these things, or give up your social security checks. There isn’t another option.

not sure how yer question relates to my answer @32 to your question how banks could lose a pantload of money if Treasury defaults.

I suppose Treasury could decide to default only on its 3-year notes or its 7-year notes, but those decisions are constrained by which class comes due soonest after Aug. 2. There is a major payment due Aug. 4. I don’t know which maturities come due Aug. 4. If Treasury picked some due dates to honor and some to default on, they would in effect be picking & choosing “who” gets paid.

But the prices of ALL Treasuries would be affected by a default on ANY class of Treasuries. So any big-ass insolvent bank hanging onto Treasuries for its own account would be forced to write down their value on the day of that default. How much? Dunno.

so, the obama administration has multiple ways to avoid a politically induced (not economic) default and doesn’t appear to be interested in using any of them.

innocent ignorance?
11 dimensional chess?

or something else?

At first I thought this was Moody’s version of “whipping” on behalf of the finance world, but the more I think about it, the more it doesn’t add up.

Wasn’t that payroll tax increase about $3.75? I don’t think that the average worker could tell any difference on their income. Where the difference comes is in their cumulated SS/Medicare earnings/contributions.

Yes, that is where we’re going.

I hope to be there.

I hope to see a lot of other people there.

I hope to see you there.

I’d pick the something else out of that list. I’m not sure exactly what yet, but it is evident the man is playing games with people’s lives.

Obama! STOP IT!

not sure how yer question relates to my answer @32 to your question how banks could lose a pantload of money if Treasury defaults.

because only some of the bills coming do would get paid and treasury decides which bills (i think). pentagon contractors, federal employees, foreign base expenses, SS payments… lots of stuff in addition to interest on debt instruments.

Those of us who hadn’t had to pay in before noticed the hit big-time — for those who don’t know, Federal employees started paying FICA/OASDI and Medicare under Reagan’s SS fix in 1983.

That is the only thing I see that is going to make a difference. They certainly don’t seem to be listening to petitions, emails, visits, or phone calls.

I bet so! Sorry about that, but Raygun messed up a great deal of the average citizen’s tax deductions. The only credit we have left is mortgage interest and they are working overtime to take that away too.

You see what I see.

That said, there seems to be no end to the amount of effort that some of us will put into fooling ourselves.

In crude terms, the T-GOPers prefer the corporatist narrative above all other evidence, including their pocket-books and their lying eyes.

And yes, the banksters are willing to gamble the future well-being of the country to remain in absolute control, power being the only thing they love more than money.

I’ll be satisfied that there’s a chance to avoid the pit if the American Spring shows signs of life prior to the 2012 elections rather than after, and it looks as if there’s a real chance that may happen.

Make plans for Washington in October.

D00d I’ve already signed up for that Freedom Bus. We need 50,000 folks to bring it. :-)

Operation Illusory Control by The Love Police (kinda of another UK version of the “Yes Men”)

“I read in a newspaper that Jesus, Mohammed and Buddha would have bought one of these toys.” – Charlie Veitch

LOL. Stopping the corporate machine that is destroying humanity is Job #1 and we can do it with a sense of humor.

welcome to the games?

who and what owns the tea party? the million dollar question

the idea of a tea party was crazy to begin with. a smart person or two could hijack the USA govt. by praying on the ignorant like Fox does.

everyone in the tea party, may not be a tea party follower? for LOL

wall street loss control of their morons? how? is there another chess player at the table?

Clinton , the other trojan horse dem, just told the current trojan horse dem to use the 14th amendment? why? what does Clinton know?

the USA is the only nation on the planet that lets foreign money buy their govt.?

what nation wants the USA to defualt?

the problem with putting morons in congress? is that at the beginning and end of the day, they are morons. for LOL

Sorry. I’m commenting only about the effects of a U.S. Treasury default on its payments due on “debt” obligations (“securities” or “bonds” or “notes” or “T-bills”) issued by the U.S. Treasury. The “debt” ceiling only applies to the amount of “debt,” and would only prevent issuance of new “debt” securities.

I am not commenting on the causes or effects of a possible failure to issue “checks” from the U.S. Treasury for payments due on claims for benefits (Social Security, SSI, VA), reimbursements for medical treatment (Medicare, Medicaid, VA, FEHBP), salaries to workers, benefits to workers, fees to contractors. Freezing the “debt” ceiling does not freeze all cash in the hands of the federal govt any more than it freezes the payment of cash (taxes) into the federal govt.

We need to separate our thinking about daily cash flow (taxes in, payments out) and Treasury “operations” from our thinking about obligations to investors in Treasury “debt” which I think are the main obligations affected by the “debt” ceiling.

I suspected, and frankly was hoping that that was what was going on – couldn’t understand why we weren’t seeing the usual wall to wall tv ads

this is an incredibly significant tactical victory in this war

just sent $10 to the SS Ads campaign

personal note: in the biker world I visit from time to time, your road name would definitely be Free Range !

My guess would be the Saudi’s.

Don’t know, but suspect they want the crisis to apply more “shock doctrine.” But Jane wonders why the banks aren’t lobbying. I’m wondering too. The can’t count on a bail-out this time. Both we and the TP would go nuts and there’d be big demos here in DC, plus calls for O’s impeachment. Lot of risk that the banks’d be taken into resolution this time. So, I think the banks are being quiet because O has given them assurances. Maybe it’s CS. Maybe it’s that McConnell and Reid think they can McConnell’s deal through and O’s said that’s the guarantee that there will be no problem. I don’t know. But I do know that the Bank’s relative silence on the Hill is indicative of some kind of info they have that we don’t.

I was recently in DC and it was a fascinating trip from every angle. A 76 year old man (check out the interview at 4:19) and a comedienne are *way* more popular that this regime.

Fractal, thanks for your comments here. Much appreciated.

The CBO has scored these things. Government spending on services and infrastructure gives more bang for your buck. Tax cuts for lower income people also provided a bang for their buck although it was smaller. Guess what didn’t have a positive impact? Tax cuts for the rich were a bust.

http://taxprof.typepad.com/taxprof_blog/2010/11/cbo-tax-cuts-were-least-effective-stimulus-in-recovery-act.html

I could take my kiddos on a field trip if you swing by Blacksburg.

I am reminded of this assessment from W. S. Burroughs:
“”We have a new type of rule now. Not one-man rule, or rule of aristocracy or plutocracy, but of small groups elevated to positions of absolute power by random pressures, and subject to political and economic factors that leave little room for decision. They are representatives of abstract forces who have reached power through surrender of self. The iron-willed dictator is a thing of the past. There will be no more Stalins, no more Hitlers. The rulers of this most insecure of all worlds are rulers by accident, inept, frightened pilots at the controls of a vast machine they cannot understand, calling in experts to tell them which buttons to push.”

All I know is the crooks in the 80′s told those of us starting out in the workforce during the 80s that they had to increase the retirement age and take more money to insure that when I was of retirement age that I’d have money to pay for my retirement. I did so gladly. Here it is a little over 20 years later and I’m still 20 years from retirement and they want to raise the age again and are telling me I should have to tighten my belt since they spent the surplus on things other than my retirement. Screw them.

Sorry, stepped away from the desk.

YES! Write us up a diary about your visit. Was DC as worried about jobs and infrastructure as we are?

Exactly! That is YOUR money and MY money. They had best keep their grubby little paws off of it! It belongs to US individually and is not part of the money to run the government with. That is where the disconnect is in DC! They think all the money in the world belongs to them!

;-) Another possible stop on the field trip as these folks are real deal and have been at it now for 19 years.

P.S. The radio part of the broadcast was beamed into Tibet.

The great majority of our governing bozos are millionaires and couldn’t give a lick if they get paid, the are only serving to get an inside track to a post government “service (cough, cough)to the lobbying world job.

And they are real pissed off that you haven’t already died so they can list you as a “savings”. Interesting how our lack of adequate medical coverage is reducing the life expectancy rate while they are looking at raising the eligibility age for Medicare and Social Security. Just a coincidence, I am sure.

A failure to send out Social Security checks isn’t even legal. How that isn’t market manipulation by Gregg and Goldman Sachs is anybody’s guess. They should all be in jail.

I don’t think those people working for Goldman Sachs worry about going to jail.

Goldman wins dismissal of Timberwolf CDO lawsuit

In answer to the question why the banks aren’t lobbying on the debt ceiling I’ll just plead ignorance and admit that my impression was they are.

http://www.reuters.com/article/2011/04/20/us-usa-debt-lobbying-idUSTRE73J5RQ20110420

My impression was that the tea party congressman who have been holding out against raising it are getting daily calls.

Then we had the “joke” by the Chamer of Commerce guy that they may have to get rid of a lot of the tea party congressman who don’t want to raise it.

http://www.facebook.com/notes/tea-party-patriots/us-chamber-of-commerce-chief-to-those-congressmen-opposed-to-debt-ceiling-increa/10150218619603823

As far as the failure to raise the debt ceiling not being such a problem, if I understand the big worry is that if the US defaulted even short term that could have a chilling effect for buyers of our debt, which of course we are so depedent on right now.

I would have to go with Update #2.

Great post, thanks.

From what I saw– and I was observing the new immigrants replacing the + 3rd generation Americans laid off in the early 2000s– the short answer to your question is “No.” Things are rolling along much as they were when I left not too many years ago. The development kept going unabated with more new shiny high rises, roads (a new toll road in Maryland), metro stops and business openings. Folks are still pretty darn comfortable as they still have jobs, health care, 401ks, retirements. good education for their kids and all the other things that everybody else used to have. They are comfortable enough that they even plan vacations. I was there a long time as the area was so recession-resistant. That changed when the remaining commercial tech sector was converted to the defense sector and the companies went off to Iraq.

“Moderate” Republicans created the Frankenstein tea party, now that the monster’s unleashed, they own him.

Moderate Sane Republicans could solve this quickly by voting for a clean debt limit increase bill.

Mike, if Obama would have raised taxes on the top 1%, made massive infrastrucutre investments, and gotten us out of the two occupations, during his first two years, the House wouldn’t have gone over to the GOP and we wouldn’t be here.

Jane, as always, appreciate the “inside baseball.”

Sorry. I’m commenting only about the effects of a U.S. Treasury default on its payments due on “debt” obligations (“securities” or “bonds” or “notes” or “T-bills”) issued by the U.S. Treasury. The “debt” ceiling only applies to the amount of “debt,” and would only prevent issuance of new “debt” securities.

that’s my understanding as well.

We need to separate our thinking about daily cash flow (taxes in, payments out) and Treasury “operations” from our thinking about obligations to investors in Treasury “debt” which I think are the main obligations affected by the “debt” ceiling.

that’s not my understanding (but what do i know?)

The US may default and Greece may default and the market is going up. Think somebody wants to make money on a major short ?

That is what is really sad in all of this… the world has been so corrupted by greed.

And the multiplier for a buck of unemployment is close to 1.7?

wild speculation here… but if the goal is to damage SS (or something like that), then a manufactured crisis affecting, for example, SS payments (but not interest on debt instruments) would cause the people to rightly rise up. then a deal is quickly brokered to resume SS payments but gut SS down the road.

everyone breaths a sigh of relief, the dems claim to have saved the day and SS is perhaps fatally wounded.

no bankster bailout required… unless they miscalculate and push the global economy over the next edge.

Boo that wasn’t really my question but ok. LOL I would like massive infrastructure investments just so we’re clear. He never had the votes for that. As for occupations he has scaled out of Iraq and we will be out at end of year and we are scaling back in Afghanistan though not as much as some people want-you can’t even claim he broke a promise there as he campaigned on the troop surge.

I guess my position is having to answer all complaints about Obama. Just call me Mr. Carney.

Meanwhile in my own life the Unemployment office has found another hurdle for me to jump before I get my benefits restarted again. And I have a car payment due next week. How are you doing?

I don’t know the average increase, Peasant; but polls showed almost no one realized their taxes were down, their pay envelopes larger. And many who did, chose to save instead of buy.

because they are all in on it — wall st, the dems, the gop, big business — and they intend to ram a ghastly bill down our throats under the cover of the “crisis” they have manufactured

expect a horrible horrible bill — think go6 — to be introduced next week in the senate

it will be pre-approved (drafted) by obama and it will quickly pass

at that point there will be just days before the “drop-dead” aug 2 deadlne

under immense public pressure (all for show) the agent orange will “reluctantly” call the bill up

every rep who dares object will be vilified in the most vile manner, the pressure ratcheted up each second by the ticking clock

the bill will pass, the american social safety net will be cut

and the shock doctrine will have come home to roost

I think the actual increase from dropping the Social Security tax was supposed to be about $25 a check for the average taxpayer. However, increases in health care costs handily took care of them. Oh and if somehow you didn’t have a health care increase than increases in gas and food finished you off. The bottom end of the economic ladder is really struggling with the effects of a weaker dollar.

Thank you so much for all you do, Jane.

You commented:

Too much talk about social security checks, which they legally can’t fail to either a) send or b) honor.

Not to go into the illegality of this, but it flashed through my mind that we could be at a USSR moment with respect to continuing to fund the war in Afghanistan. Or, say, a US moment with respect to Vietnam. There, the funding for the war came out of the programs for the poor which were Johnson’s continuation of the Kennedy legacy (a major reason many not so well off still have photos of Kennedy, if they still have homes that is.)

This has to be a Shock Doctrine moment for these programs because our warhappy C in C has shot his wad. That’s the reason now as the alternative is – we stop the wars. A wiser man would. Not this man.

But it may happen in any case. Wow. I hope so. Maybe it is always darkest before the dawn. And maybe that first drone that so messed up this pretend presidency was the first straw on the camel’s back, and now we are about to put that last little straw on the pile…

Now, let’s all hunt for that straw!

Yepper. If you give money to folks on the bottom end of the economic ladder then they will spend it. They have to. Folks on the top already have the means to spend if they want, so sometimes they just park it. I don’t know how many times the bozos in Congress need to see that on paper to get it through their thick heads.

That’s really good news.

I am not a constitutional lawyer so I am asking. I saw a constitutional lawyer on Rachel Maddow the other night and he said that President O, could only use the 14th amendment if there was a default first and harm came to the U.S.economy. Being the Commander in Chief he would be able to intervene. He said that he could not use the 14th Amend. before a default because it would conflict with the appropriation of money that Congress controls. I am sure I don’t have the terminology correct but it sounds to me we have to see default first and a calamity happen before the president can intervene. Does anyone know if this is close to the truth?

He never tried to get the votes for that either.

Austan Goolsbee made it clear during the first stimulus(Remember those checks sent out during the Bush years) that Obama was a free marketer. He actually mocked infrastructure spending then.

Wait, can’t treasury pay off bonds that come due with the revenue they have? Can’t they issue new debt so long as it does not exceed the debt limit?

Is it possible that the banks WANT the default so interests rates go up and they can foreclose on a LOT of properties? That would certainly seem to be a quick trip into feudalism.

Wow! Love it.

A very important factor is that no one knows the US dollar’s real value or what it will be next week, next month, or next decade. All the proposals and debating points use dollar units instead of percentage values, so the projected estimates could be way off.

There’s no resolution in sight because the dollar’s ‘value’ is highly volatile right now.

Examples of two canaries in the coal mine: gold dealers are buying gold one-ounce coins for $10+ above spot (silver coins for proportionately the same above spot), which indicates that US dollars aren’t worth shit today.

Also, Chase (a credit card account) just sent me an offer (good thru 8/31) letting me borrow as much as $5000 at 0% for a year with a service fee of 1% (one percent). I haven’t seen such an offer since 2005.

They can’t even foreclose on what they got so far. The market is flooded.

No. I don’t think houses are what they are after.

This crisis “ruse” is quite simple really.

http://www.youtube.com/watch?v=d5Ujn2UxTcY

What George Bush couldn’t accomplish for Wall Street, will now get done by Prez Fraud.
Jane hit the nail on the head when she said “Obamabots are the dumbest motherfuckers on the planet.”

People need a Peoples Party. One that takes a “pledge” to represent the workers of this Country and their interests.

Heh

Which came first the chicken or the egg? Part of the dollar’s volatility is due to concerns that we won’t honor payment on our debt. Meanwhile the volatility of dollar effects our debt talk discussions.

Yes. And yes. But they don’t have enough cash to do the first, at least not enough to pay the Aug. 4th coupon, and they won’t be able to re-finance anything on Aug. 3 to raise new cash to pay the Aug. 4th coupon until the ceiling is raised.

Meanwhile, here comes the run: yields on 7-year notes have now spiked nine basis points (bp) today.

If the treasury can issue new debt within the overall limit that will hold off any default of bonds for some time. That suggests to me the first things to happen would be cuts to personnel, lay offs and the like and non payments to contractors. SSMM and military like spending would be a little later. But who knows?

I think there is some selling of bonds as Fractal says since interest has moved up. But that is likely those with lower risk tolerance. There is certainly not a run for the doors just yet. If this lasts a while, then there would be some problem with potential real default and someone is going to lose money. That is sometime off and I think by then the pres will invoke the 14th amendment. Who would want to tell China their debt won’t be paid this month? By then our economy would be toast and it would take a long while to fix, since unemployment will have multiplied beyond federal employees. The long term effects on us would be substantial. The stock market would also likely be in free fall. I think WS just doesn’t believe it will get to that just yet.

I’ll guess that most Social Security payments aren’t physical checks but are electronic direst deposit transfers, and I’ll guess that they’re ‘paid’ via an automated program from year to year. No guessing that the banks depend on these promised regular lump sum deposits in no small way.

The yields on the seven-year and ten-year Treasuries have now spiked ten basis points (bp) and 9.5 bp, respectively. The run is mos’ def’ on now.

There is some concern no doubt, but 9 basis points seems a lot to me. The fed could step in and buy up some of those, so I am not sure I would short them.

I saw ads on TV today talking about how the government is trying to cut SS and medicare and to call your congressman, etc – and it said brought to you by AARP. I was shocked and then I thought, FDL did that. If there was no pressure put on AARP, they would have supported the cuts.

If the fed steps in and buys them, they can sell them later to finance some treasury operations, yes? and make a few bucks besides.

If they are selling somebody else has got to be buying. If their price isn’t falling that means the buyers are not really that worried; if they are not that worried probably the banks aren’t worried either. I think the real thing going on here is that everybody important thinks the whole thing is a charade, and that there will be a settlement that cuts SS and Medicare at the last minute.

Bloomberg’s editorial stance on why prices of U.S. Treasuries are falling so sharply today and, thus, driving up yields so sharply: it’s all cuz Euro zone is gonna let Greece default, but Euro banks can handle it, so emergency is not so huge, so we don’t need to flee so much to safety of U.S. Treasuries.

WTF? Just watch the yields spike and dribble back down and spike again and dribble back down again all afternoon today.

I still think that is most likely, but you can’t put this shit in a test tube and pronounce “aha, here’s the answer.”

Those Bush checks weren’t very stimulative either-one weakness they only went to current taxpayers. You say O and Goolsbee ruled out infrastructure even in principle? Cause I don’t remember that.

I like the U.S. Mint solution better: mint a single coin for {{{ One Trillion Dollars }}} (cue Doctor Evil), put the trillion bucks in the Federal Reserve, have the Fed buy One Trillion Dollars of Treasury Debt. Poof! Debt ceiling not a problem. At least not for six months or so.

that makes more sense to me. The US default prospects seem a little far off, but possible. On the Europe thing I think Selise has said they will all likely go bust one day. Soros has also said that the whole thing is unstable. Unfortunately, our banks have bought into that stuff and so they are on the hook as well. I’m surprised though that the stock market is handling it in stride. Guess the smart money knows all the answers.

I love how the next thread upstairs is about the debt ceiling “mosh pit.”

The bond traders today are fer sure wrestling in a massive mosh pit. Somebody else should look at the yields on corporate bonds while I’m monitoring Treasuries, betcha there’s some crazy shit over there, too.

That is certainly appealing. I wonder though if someone will not call that new debt over the ceiling and cause a shit fight? It is certainly not debt owed to anyone but ourselves. We could just leave it in a box in the fed fault for the next thousand years or so, who cares? I just don’t know what happens. If it is so easy, why not just eliminate the debt with treasury coins?

Christina Romer wanted $1.7 trillion; Snowe and Collins agreed, as I remember. He HAD THE VOTES. Obama chose the lower package, and even then if was half tax cuts.

Boooo.

Thank you for not letting Mike Sax rewrite history; it gets annoying, IMO.

BTW, doesn’t the fed hold some treasuries that it acquired in QE2? Are those bonds considered outstanding?

Yes, They count against the outstanding debt. In fact one of the seigniorage options in the link I provided above is for the Treasury to use the profits from a proof platinum coin with $1.6 T face value to buy the securities from the Fed and retire them; immediately creating $1.6 T of borrowing authority and ending the immediate crisis.

I can’t help but wonder whether the “big boys” are manipulating the bond market on purpose for nefarious reasons.

Soooo, who’s the biggest loser if we default? The Banks? What could they possibly take from us, the middle class, that they don’t have a piece of already or didn’t already steal? I say, fuck it. Let them default. Maybe we’ll get some real accountability then.

Could be. Their ability to project public reaction isn’t very good. If people rise up; they’ll be watching for any settlement that sells out SS down the road.

It’s a useful tactic to create a climate of fear and let their main man Obama sell the “need” for cuts to SS.
The SS fund is among the largest creditors to the USA.

I hope everyone knows that was just a joke, that thing about the trillion dollar coin. I probably saw it first over at Naked Capitalism. Check out the last graf of Jon Walker’s next post about the “mosh pit.” Jon linked to this obscure post over at Naked Capitalism on July 11. Notice how nobody commented on it, or else Yves took down all the comments. It’s not serious, IMHO.

I didn’t try an rewrite anything and you’re attempt to divine my motives gets annoying. Christine Romer did want more but I’m not aware that it ever had the votes.

How many votes did it need? And 60 is the wrong answer.

60 is right as there were so many fillibusters during that congress.

And how many did the Health Insurance bill need, same senate, same filibuster scenario?

http://firedoglake.com/2010/10/28/obama-blames-insufficient-stimulus-on-ben-nelson-and-olympia-snowe-suggests-fdr-was-irresponsible/

http://thinkprogress.org/yglesias/2009/10/14/194727/christina-romer-vs-political-reality/

I’ll quit googling; but most accounts that weren’t simply trying to read the minds of Specter, Collins and Snowe agree that the WH decreased the number. And again, didn’t start with a number larger than a $1.2 trillion target.

Clinton tried to get stimulus like Oil for Seniors program added to it. They mocked her for it.

No, Obama was free market even as a Senator. It’s one of the reasons I didn’t support him in 2008

An article from April saying they “intend” to.

We welcome people of differing opinions. But that’s the second time I’ve seen you push out disinformation. Third time is the charm. You won’t get another warning.

They were a bad idea. Fear kept most who could afford to spend them from spending them.

Obama learned a little when he went for the second stimulus but again he wasn’t nearly bold enough.

Instead of punching the hippies he might actually want to listen to us. We often aren’t wrong as nearly often as we’re right.

If he cuts spending in the wrong places he may secure his place in history as one of the worst presidents.

He could have used reconciliation if it had been important enough for him.

Unfortunately he was bound and determined to be all bi-partisan-y. How’s that working out for him?

My wife runs the trading desk for a investment bank. She broke up her 401k last week to get rid of the T-Bonds and lo and behold the Insurance Company that is the largest inverstor was also getting out of T-Bonds. If the government defaults the banks WON’T BE HURT. Time to break ‘em up into tiny little bits.

I still remember when he threw women reliant on low cost birth control under the bus to get exactly ZERO republican votes.

Lord,help us from Obama’s bargaining strategy.

Just one of the TNT-C (too numerous to count) betrayals by President Obama to blow up the “great society”.

Mike Sax wrote at #91

“As far as the failure to raise the debt ceiling not being such a problem, if I understand the big worry is that if the US defaulted even short term that could have a chilling effect for buyers of our debt, which of course we are so depedent on right now.”

There have been several contraindications from the various rating agencies on downgrading the US – that raise it or not they still would downgrade. To me, lots of these folk are running round in circles not to have that happen. And they will throw the needy among us under the bus to accomplish this. Because they gotta have those wars, since apart from the wrecked financial bubble, that’s where the corporations are raking in whatever is left. It is a military/industrial complex after all.

Now hey, I hate birpartisanship as much as the next guy. True story.

I certainly would have wanted a larger stimulus-yet I do think if not for last Nov he would have gone for a little more when he saw it was needed. At the very least we wouldn’t have had the huge budget cuts we’ve had.

In his original proposed budget he had no cuts.

Sounds like your wife has a good job though, would breaking them up in little pieces hurt her job?

“Lobbying push targets lawmakers on debt vote” That is the headline of the link

http://www.reuters.com/article/2011/04/20/us-usa-debt-lobbying-idUSTRE73J5RQ20110420

I certainly didn’t intend to push disinformation and don’t see where I did. It’s possible for someone to misread a source, but my including links show my good faith. If I wanted to peddle misinformation I would not have included it.

Don’t really get where the “intend” part comes in. Maybe you mean the other link about the Chamber of Commerce joke. I made that clear it hadn’t happened, that it was an “intention” at best.

I had simply pointed out I have a different impression than you. It is certainly possible that this impression is wrong. To be mistaken about something is hardly pushing false information.

What I was looking for was someone-you are’t a bad candidate as it was your post-to maybe if I were mistaken show me where. In post 154, Juliana did something like that.

You have clearly chosen a different route which I do believe is mistaken.

You say that dissenting points of view are welcome and that was my understanding coming in. Hope I wasn’t mistaken there.

8. The banks want what Obama and the Wall Street Uniparty wants: a last-minute ‘rescue’ type deal rushed through that saves the day and oh, by the way, cuts $3 trillion from Social Security, Medicare, and Medicaid. Like their brethren in Europe, they want austerity everywhere except behind the walls of their estates.

I think Wall Street has gotten some form of private assurance that Obama will step in and use the 14th Amendment option.

Also, doesn’t Judd Gregg always looks like someone just dropped a chainsaw on his head? He’s as stupid and venal a New Hampshire tree stump as I’ve ever known.

Still I admit that if as a GS analyst he rates the chances of defaulrt 50% that’s interesting. Remeber he’s saying this as an analyust not as a politiican-he has more incentive to tell the truth here.

The banks aren’t lobbying Congresscritters to raise the debt ceiling because the actual legal ceiling gets raised to whatever is necessary to cover spending by any and all laws that obligate spending.

The hostage-taking threat here is that failure to raise the ceiling would force Obama to ignore the formal requirements of the debt ceiling law in order to honor the requirements of every law that obligates spending. The banks don’t care about that hostage. If anything, most of those folks would probably rather see that hostage bumped off, because they favor the Rs, and the Rs would rather fight the next election attacking Kenyan Usurpation than defendng Ryancare. A fake constitutional crisis is just what the docter ordered for the Rs’ chances in 2012.