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US Government Shutdown

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Smurf1976

Smurf1976

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So far as I can tell, nobody outside US political circles seems to be taking the current US Government partial shutdown seriously. Everyone seems to be just assuming that a solution will be found and that a default will not occur.

The overall situation with US government finances seems to be akin to a machine etc that is wearing out. First it works perfectly. Then it gets hard to start, but after a couple of tries the engine springs to life. Slowly but surely it gets harder and harder. Then the day comes when it just won't go no matter what you do.

US finances seem to be heading that way. Each crisis seems a bit harder to resolve than the last one, and these "debt ceilings" are about as pointless as you can get given how often they are raised. The notion that they have an actual self-imposed limit is a bit like saying you're only drinking one beer. Then you go back to the bar each time the glass is empty. You only ever bought one beer at a time, but that doesn't stop you from getting drunk. Much the same with the US debt - they may "only" be adding a trillion $ here and there, but they add more as soon as the limit is reached which makes the notion of restraint misleading at best.

My thoughts are that nobody seems to be taking this seriously and the markets are an indication of just that. But when things aren't taken seriously, that's when big surprises often occur. If not this time, then sooner or later there's going to be a problem - just like the machine eventually breaks and stops working if you ignore the warning signs.
 

Seeing the markets everyday intrday, i can say that we have a big range and we get to the lower end of the range and the shorts get scared and we trade to the higher side of the range....We get to the higher side of the range and the longs panic and we trade to the lower side of the range....This is not apparent on every market but its evident on a few a i trade. The market is not confident and is acting like its uncertain...
 
I think you barely ever see a big reaction from the market when something is happening that everyone is expecting. The government shutdown was not unexpected, so there was no big reaction, people expected it and expect it to get solved. They also expect the debt ceiling will come down to the last minute again but that it will eventually get done. Only if peoples expectations change that it won't be solved will we see a big reaction. Things are becoming a little bit more uncertain now but I think the markets are stil more looking toward the taper than the shutdown and debt ceiling before deciding on their next move.

Also keep in mind that the media will be talking about the worst possible scenario and the end of the financial world etc when in reality is is extremely unlikey to happen, at least in the short term to medium term, from the reporting on it you would think the shutdown was unexpected when in reality I reckon nearly everyone expected it was very likely. Most market participants are judged on how much they are making now and even if they think things are going to come crashing down they will keep doing what they do in the mean time.
 
Knobby22 said:
Check out Kohlers graph on the debt ceiling, very interesting.
http://www.abc.net.au/news/business/kohler-report/
Click to expand...

Thank you, that is a far better example of the media fear mongering I was talking about than I could have come up with myself.

Thing is, when people are employeed and paid based on how many people view their 'information' or forecasts rather than how accurate or useful the 'information' or forecasts actually are, it creates a pretty big conflict of interest.

If you are managing a media company do you put on the guy who is going to give interesting but **** forecasts that will give you great ratings or the guy that is going to give great but boring forecasts and get you **** ratings.
 
havaiana said:
Thank you, that is a far better example of the media fear mongering I was talking about than I could have come up with myself.
Click to expand...

I fully agree that the media will blow anything out of proportion simply because it's good business to make every little issue seem like a big issue.

But that link isn't a good example of that. He basically just showed a graph of the government debt vs the debt ceiling and noted that a fake ceiling doesn't seem to cap spending. He was actually saying we should stay calm, since this debt ceiling crisis thing is a common occurrence and not really an imminent crisis at all.
 
havaiana said:
I think you barely ever see a big reaction from the market when something is happening that everyone is expecting. The government shutdown was not unexpected,
Click to expand...

The US is diminishing its importance as a global economic influence, it was only in passing news that obama didn't attend apec..the markets reacted to the US crisis but its a reaction to an adjustment to move on with or without the US. imho, the problem is those old delusional republican cronies still think Regan era economics rule the world. LOL

China, middle east, EU, russian fed, Oceania region, asia etc canada, south america have all hedged their economies with each other or other countries as well not just the US as once was a decade ago and have diluted their risk to the US.
 

The whole point of having a debt ceiling is that, everytime it is reached, there'd be debates and dicussions about how money is being spent. So the system is actually working when the ceiling doesn't get raised automatically.

It's like saying you only have money for 1 beer and everytime you want the next drink you must go to your wife for the money to buy the next beer, and in order to get that money you might need to debate, give backrub, let her shop etc. I bet you'd get drunk a lot less and a lot slower.

Everything is possible in markets and in politics, so the market needs to price in a possibility of a default (and I don't know what that means quantitatively). But the probability of a default is still on the low side imo.
 
skc said:
Everything is possible in markets and in politics, so the market needs to price in a possibility of a default (and I don't know what that means quantitatively). But the probability of a default is still on the low side imo.
Click to expand...

The very low side, IMO. Don't forget that even without increasing the debt ceiling the US can still pay *most* of its bills and easily cover all its interest payments through tax revenue.
 
Talking to friends in the US who are savvy investors, they are becoming increasingly concerned. Although it is easy to say this is nothing new, the political scene is vastly different to previous occasions.

This time the agenda on one side is being determined by extremists and many of them will support the likes of Cruz who say it will be a good thing if the US defaults on their loans and don't see a problem with a downgrade of the US credit rating. Boehner doesn't want to bring on a vote because last time he lost and the same would happen this time. He doesn't want to then be deposed as Speaker. If that happens it would be likely Cruz will have more power and the extremists will have more say.

Our friends have gone from saying ho hum here we go again to being very concerned.

Cheers
Country Lad

PS I can't remember whether whether I posted this here or on another forum, so apologies if it is a repeat.

http://www.nytimes.com/2013/10/06/opinion/sunday/dowd-welcome-to-ted-cruzs-thunderdome.html?hp&_r=0
 
Smurf1976 said:
So far as I can tell, nobody outside US political circles seems to be taking the current US Government partial shutdown seriously.
Click to expand...

A "Claytons shutdown" a shut down when your not having a shutdown, more like a slim down. Many have been recalled from their furloughs, and The House on Saturday voted 407-0 to approve back pay for furloughed federal workers.

House Speaker John A. Boehner emphasized that he will not permit the country to default for the first time on its debt. He still holds that position.

At the moment they are in 'conversation mode' as reported some of the latest google financial links....so the share market casino will probably morph into the the next phase...place your bets please!
 

Good points, bugs,

It is however the end of an era, or if not the end, close to it.

The US Credit Rating in all it's elements, has been irreparably damaged by these latest shenanigans.

Since 2009 there has been a stench coming from the US of political instability and casino-like fiscal management.

The US people will suffer the most, it's dollar, assets and economy will devalue, and Americans will rue the day they elected such muppets to the Presidency, Congress and Senate.

gg
 

Not that australia's politik is any better and our 'market' -housing,shares, etc etc are higher than ever.

Its that kind of crazy in politik that fuels market "pulses". Lack of G.W bush crazy politics gave us a flatline or GFC 2007-8.

Its like a giant financial heart, sucking all the crap into the chamber and its about to take another beat, like it did last debt ceiling crisis around same time in 2012.


See where it takes us this time...my guess is roaring 1920's repeat and late 1920's collapse. similar pattern to last century- but with bumps and scrapes along the way.
 
I wouldn't be surprised if the US defaults.
Some of those d'head Republican senators have probably shorted the stockmarket and want to collect.
 
Knobby22 said:
I wouldn't be surprised if the US defaults.
Some of those d'head Republican senators have probably shorted the stockmarket and want to collect.
Click to expand...

would not surprise me at all....seriously.:frown:
 
Even if they dont default they are still bankrupt.

You can only kick the can down the road for so long, personally i think they should just default get it over and done with. Smart investors know its a matter of time until the ponzi scheme is over.
 

You may be correct bugs,

From Obama to the Tea Party, the two biggest nuts, lie many smaller nuts.

Only in the US.

Perhaps China will take up some of the slack, although they own more US Treasuries than anyone else.

I don't see a way out of this mess.

gg
 
So, we're on the edge of a US default and meanwhile the Dow is going up and near its' all time high.

Something doesn't make sense here. Reading the various media reports etc, it still seems to be taken about as seriously as an April Fool's day prank. It's right up there with lost dogs, minor traffic accidents, weather etc and somewhat behind the antics of some c-grade celebrity and how well a local sports team played on the weekend.

Whilst I doubt that an actual default will occur, I was expecting at least some reaction from the markets as though it were at least possible. Thus far at least, no real impact on anything it would seem. Some jitters maybe, but it's not as though there has been even a modest decline in the share market etc.
 

Probably the market defying the Tea Party 'shorters' of their windfall gain... to send them home out of a cause, out of public sympathy and out of pocket.

The Irony though is that while Obamacare is copping the flack from the Tea Party as the problem, the fact is the precious three Republican Presidents ran up enormous debt including going to war, while the intermediate president, Clinton (Dem) actually reduced debt.
 
I starting to think this is a Baldric style cunning plan by the Republicans.

Provide small window increases in the debt ceiling, thereby keeping the Fed Reserve from starting to taper.

Trillions in cheap QE money stay in the system pumping up asset prices, which benefits the Republics and their supporters far far more than the Democrats.

Ingenious really. Lucky they don't have to keep building new printing presses to make it work.
 
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