Growing disquiet over possible US debt default

Obama not ready for negotiations with Republicans until the end of government shutdown

President Barack Obama told reporters at the White House on Tuesday that he will discuss the future of his Affordable Care Act with Republican opponents in the House of Representatives only once Congress re-opens the United States government.

RT,

8 October, 2013

At the start of the second week of a widespread government shutdown, Pres. Obama warned House Speaker John Boehner (R-Ohio) during his Tuesday afternoon address that the White House won’t negotiate the fate of the president’s hallmark “Obamacare” legislation.

One week earlier, a stalemate in Congress was unable to be resolved ahead of a Tuesday morning deadline required to pass a spending bill that would have kept the government fully functioning. Republican critics of Obamacare refused to authorize any budget plan without ensuring the congressionally approved health care act would be defunded.

Obama said Tuesday that he is happy to have a conversation or negotiation with Republican leadership in the house, but such a discussion “shouldn’t require hanging the threats of government shutdown or economic chaos” over American people.

“Members of Congress, and the House Republicans in particular, don’t get to demand ransom in exchange for doing their job,” said Obama. That job, he added, requires those elected officials to pass a budget

“No American president would deal with a foreign leader like this. Most of you would not deal with coworkers or business associates in this fashion, and we shouldn’t be dealing this way here in Washington,” said the president.

Democrats are eager to reach a deal, added Obama, but said lawmakers would not let talks occur “if the entire basis of the Republican strategy is ‘We are going to shut down the government or cause economic chaos if we don’t get 100 percent of what we want.”

“Let’s lift these threats from our families and our businesses, and let’s get down to work,” Obama added. “Let’s stop the excuses, let’s take a vote in the House [and] let’s end this shutdown right now.”

Should Republicans not allow the government to re-open, added Obama, then the debt ceiling will not be raised and America may effectively be driven to default.

A default, warned Obama, “would be dramatically worse” than the government shutdown that started early last week.

“If Congress refuses to raise what’s called the debt ceiling, America would not be able to meet all of our financial obligations for the first time in 220 years,” he said.

Experts have previously predicted that an economic shutdown would be “insane” and “catastrophic” for the nation, added Obama.

The president acknowledged that the phrase “debt ceiling” may be too intimidating for lawmakers to tackle the issue at hand, but insisted “this does not add a dime to our debt. It simply says you pay for what Congress has . . . already authorized America to purchase.”

“All it does is allow the Treasury Department to pay for what Congress has already spent,” he said, noting that it’s been done 45 times since the first term of President Ronald Reagan — or around 1.4 times a year.

 “I will work with anyone,” added Obama, who explained that only such talks could occur once Republican members of the House rescind their threats.

“We can’t make extortion routine as part of our democracy. Democracy doesn’t function this way,” Obama said. 

During a brief press conference Tuesday afternoon Boehner said he was “disappointed” that the president refused to negotiate with Republicans. The Speaker did not specifically mention the healthcare law at the root of the shutdown, and said it was a “disgrace” that military families are not receiving death benefits when prompted by a reporter.

“The long and short of it is there is going to be a negotiation here,” Boehner said. “The president said today if there’s unconditional surrender by Republicans, he’ll sit down and talk to us. That’s not the way our government works.” 

At Least Now It's Obvious Who's In Charge

Zero Hedge,

7 October, 2013

Submitted by Simon Black of Sovereign Man blog,

It’s clear to everyone by now that the government of the largest country in the world is careening towards default in just over 200 hours.

Yet curiously, even though the US government’s completely ridiculous, untenable fiscal situation is a front page embarrassment for the entire world to see, markets have barely budged.

A few very short-term rates have shot up, but for the most part, stocks are very close to where they were before the shutdown.

The US 10-year yield has actually dropped over the last month, from 2.95% in mid-September to 2.64% today… pretty much where it was a week ago before the shutdown began.

(Bear in mind that the 10-year yield in Italy, Spain, etc. were all over 7% at the most recent peaks of their respective crises…)

Meanwhile, other rates like the 30-year Treasury and 30-year fixed mortgage rates are even a hair lower than they were a week ago.

Where’s the calamity? Where’s the panic?

There’s been almost none.

The conventional wisdom right now is that, since the government shutdown is reducing US GDP growth by approximately 0.1% per week, the Fed is going to keep printing money to the tune of $85 billion per month (or roughly $1 TRILLION annually).

Remember, at the beginning of the global financial crisis, the Fed had less than $500 billion in US Treasury securities and almost zero mortgage backed securities (MBSs).

Today, the Fed owns over $2 trillion of US government debt (a 4-fold increase) and another $1.3 trillion in MBSs.

They’ve completely mopped up every ounce of liquidity. And in doing so, they’ve twisted interest rates and manipulated every asset class from stocks to bonds to real estate to commodities along the way.

Stocks and bonds haven’t moved because nobody cares what’s happening in the US government anymore. And that’s because every serious investor understands that the US government long since abdicated any economic power to the banking sector.

Everyone knows that the Fed is going to keep printing money, ergo they’re going to keep sending markets higher.

The US government and the incompetent elected officials are just giant stooges in this deeply flawed monetary system.

And this debt ceiling charade only proves it. The secret is out there in the open. And now it’s completely obvious who’s really in charge.