US debt

US blows out $16.7 trillion debt limit

The US Treasury has already exceeded the federal legal borrowing limit of $16.7 trillion in May. That signals the main structural problems remain unresolved putting at risk the fragile recovery.

RT,

26 July, 2013

The country’s  outstanding public debt is already $38.82 million above the statuary debt ceiling and now at $16,738,220,000,000.00, according to Treasury data. 

Christopher Weafer from the Economist Macro Advisory Consultancy says the numbers show “that the debt issue along with the deficit is two very structural problems in the US that remain unresolved and without any clear mechanism on how they are going to be resolved”. 

“In the short term it doesn’t cause any immediate crisis and that’s why I guess the news is not widely covered, ” Weafer told RT. 

The American economy grew at 1.8 percent during the first three months of the year, lower than its 2.5 percent average pace during the last two decades. The unemployment rate, at 7.6 percent in June, remains above its 6 percent average during the period, Reuter’s reports. 

Despite the US Fed and politicians are speaking  about recovery, that US economy which is picking up and looking stronger next year, the unsolved debt and deficit issues may reverse the process, Weafer says. 

“The US budget deficit has only been twitted down by a few hundred million dollars. It’s still massively in deficit, and therefore the amount that the US government needs to borrow to fund that is still rising,  so we’ve reached this technical limit and it will go higher. These are issues that still need to be resolved and they will determine whether or not the pace of recovery can be expanded or whether it will be temporary and reverse next year.” 

On Thursday President Barack Obama criticized House Republicans for demanding conditions on raising the US debt ceiling as he tries to shape the coming congressional debate over the nation’s budget priorities, Reuters reports. Obama accused Republicans of skirting responsibility to “pay the country’s bills” and refusing to spend for needed investments in education, energy and research. 

“That’s not an economic plan,” Reuters quotes Obama.  “That’s just being a deadbeat.” 

House Speaker John Boehner earlier this week said Republicans won’t agree to raise the debt ceiling without spending cuts. The current limit was expected to be reached sometime between October and December, according to Reuters. 

In the debt ceiling debate two years ago, lawmakers and the White House battled for months before Obama signed an increase into law on Aug. 2, 2011, the day the Treasury Department warned that US borrowing authority would expire, Reuters reports.

Record US debt

Central Banks Sell Record Sums of US Debt

CNBC,

28 June, 2013

Central banks sold a record amount of US Treasury debt last week and bond funds suffered the biggest investor withdrawals on record as global markets shuddered at the prospect of the US Federal Reserve ending its quantitiative easing program.

Holdings of US Treasuries held at the Fed on behalf of official foreign institutions, dropped a record $32.4 billion to $2.93 trillion, eclipsing the prior mark of $24 billion in August 2007. It was the third weekly outflow in the past four weeks and came as Japanese investors, who are big holders of US Treasury debt, sold a net $12 billion of foreign bonds last week, their biggest sale in 14 months.

Bond funds tracked by EPFR Global, a data provider, saw total redemptions of $23.3 billion in the week to June 26. US funds were the worst hit, with withdrawals totaling $10.6 billion, but emerging market debt funds also saw record redemptions of $5.6 billion.

That is twice last week's withdrawals. Over the past five weeks emerging market debt and equity fund outflows have totaled $35 billion, of which $22.5 billion has fled stock market funds.

"People are throwing in the towel," said Markus Rosgen, chief Asia equity strategist at Citigroup. "It'll drag the market down lower over the course of the summer.

Fixed income markets have tumbled since Fed chairman Ben Bernanke first signaled on May 22 that the US central bank would begin reducing its asset purchases later this year. Yields on 10-year US Treasuries have risen sharply since then, hitting 2.52 per cent on Friday compared with 1.62 per cent at the start of May.

A noticeable rise in short term Treasury yields in spite of the Fed stressing it is no hurry to tighten policy, could well be a function of emerging market countries selling two-year notes to support currency intervention efforts.

"We can only speculate at this point about which countries were selling, and what maturities were being unloaded," said Lou Crandall, economist at Wrightson Icap. "One obvious possibility is that emerging market nations whose currencies have been under heavy pressure sold shorter-dated Treasuries for intervention purposes."

Global markets have regained some of their footing this week, with bond yields declining and most stock market clawing back some of their losses. The FTSE All World Index gained 2.7 per cent since Tuesday, and the average international bond yield for emerging market government fell to 6 per cent, after spiking to 6.4 per cent, the highest since October 2011.

Fund managers stress that the Fed is still buying billions of dollars worth of bonds for months to come, and point out that actual interest rate increases are far away. But most are still cautious, and are waiting for US Treasury yields to settle.

"In the near term things look difficult," said Boon Peng Ooi, chief investment officer for fixed income at Eastspring Investments. "We have to be wary of outflows, as the impact of flows in these markets can be great."

Some asset managers are concerned that if outflows continue it could force some to sell positions once more and trigger another, deeper leg in the fixed income rout.

"The summer is hot and shallow. If people capitulate then it will not be nice," warns one big asset manager. "

Equity funds failed to benefit from the move out of fixed income, with redemptions hitting $13bn in the week ending June 26. Japan was the only place to see net equity inflows in the past week.

Asset sales select commitee hearings a perversion of democracy

This news disappeared almost as soon as it appeared, and naturally didn't make it into the print media.

It appears that Treasury has already made its report – so the democratic process of submission to select committee is uncecessary – except as a figleaf.

People who have made made submissions have been asked by National members who they voted for. No doubt their positions will have been noted.


Remember 80% of New Zealanders are against asset sales

Democracy, for all intents and purposes, is dead in this country.

Asset sales hearings labelled a farce

Treasury wrote its report on the select committee hearings into the Government's partial asset sales legislation before they were finished.

Radio New Zealand,

24 May, 2012

Wednesday was the last day of hearings by the Finance and Expenditure Select Committee on the Mixed Ownership Model Bill.

Submitters in the committee room heard that Treasury officials had already written their report, before all submitters had had their say. Opposition parties say this is reprehensible.

Labour says the Government does not care what people think and it has treated submitters with contempt.

The Green Party says it shows the Government never had any intention of listening to the submitters.

But committee chair Todd McClay (National) says the select committee has shown nothing but respect to submitters.

While he would not comment on the current bill, he said Treasury has written reports early in other cases.

The committee will report back to Parliament on or before 16 July.