Absolutely everything you need to know about how the government shutdown will work:
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Life takes us in many strange directions and wonderful discoveries. It never turns out the way we thought it would.
Monday, September 30, 2013
Sunday, September 29, 2013
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The Very Real Possibility Of A US Government Default in Mid October, 2013
My readers the huge danger here is a miscalculation that leads to a default in the US government's debt. Here are some of the terrible possible consequences below thanks to New York magazine:
Here are Some of the Apocalyptic Things That Could Happen If the Debt Ceiling Is Breached
There's a storm coming.
Even if you're just tuning in to this fall's fiscal theatrics, you might have heard that there are two bad things that could happen very soon: a government shutdown, and a breach of the government's debt ceiling. A government shutdown sounds worse, in the sense that "shutdown" is a scary word and shutting down an entire government seems drastic. But make no mistake: a debt-ceiling breach would be much, much more painful. Economists and policy experts agree that reaching the "X Date" – the date on which we run out of money to pay our bills in full and on time, estimated to be around the end of October under current conditions – could be the start of financial Armageddon.
Here's what could happen if we reach the X Date with no debt-limit extension in place:
We'd have to start making really hard choices.
On the X Date, the Treasury department (which pays the nation's bills) would have a major problem. It would have no cash left, and not enough new tax revenue coming in to pay its bills in full. Hypothetically, its best option would be to "prioritize" payments – using the money it does have to pay for the things it deems really important (Medicaid and Medicare expenses, say) and letting the bills for less-important things go unpaid for the time being.
The problem is that there aren't really any less-important things included in the Treasury's regular payment schedule. It's all stuff like food stamps, Social Security, military pay, unemployment benefits, and federal worker salaries. So these choices would be really, really painful. And forget about funding it all – it's estimated by the Bipartisan Policy Center than 32 percent of the government's entire spending would have to be cut, in order to spend only the cash it has on hand.
Another problem with prioritization is that we don't even know if it's legal, or if the government can physically do it. The Treasury department's computerized system, the one that sends out payments as they come due, isn't configured to pay certain bills instead of others. In the BPC's words, "prioritization would require a massive overhaul and reprogramming of these operations that may be impossible."
Treasury could also decide to pay an entire day's payments at a time, once it's collected enough tax revenue to fund the entire day. This would mean not having to make tough choices between programs, but it would also mean that every government program was on the same terrible, sinking ship – with no lifeboats, even for the neediest ones.
We could default on our debt.
The U.S. has never, ever missed a payment on a bond it issued. That's why Treasury bonds have traditionally been considered risk-free – you know you're getting your money back. But under a debt-ceiling breach scenario, Treasury might have to delay or even miss payments to bondholders, putting Treasury bonds into technical default.
Between October 18th and November 15th, more than $370 billion in U.S. government bonds are going to mature. Usually, when this happens, the Treasury department simply "rolls over" the debt – it issues new bonds, and uses the proceeds to pay the old bondholders their principal plus interest. But rolling over debt in a post-X-Date scenario gets tricky, since new bondholders might demand much higher interest rates, or, if not enough people wanted to buy the new bonds, Treasury might have to start paying back the old bondholders out of pocket. It might even have to default on the bonds.
We don't really know what happens if Treasury bonds default, since it's never happened. What we do know is that it would destroy the market as we know it. Banks could go under, credit markets could seize up, money-market funds could "break the buck" (meaning that the net present value of their assets would be less than 100 percent of what their investors put in), and ratings agencies like Standard & Poor's would almost certainly downgrade the U.S.'s credit rating, leading even more capital to leave the country. There is no good default scenario, only lots of really terrible ones.
Investors might run away from Treasury bonds.
If bondholders get scared of a default or a restructuring, they'll start selling their Treasury bonds. The government will raise interest rates on new bonds to make them more attractive to buyers, which will then cause rates on all kinds of credit to rise. Car loans and mortgages will cost more, and we could see the kind of credit freeze we saw after the financial collapse.
Or, they could run toward Treasury bonds, which might be worse, actually.
Adam Davidson makes the case that in the event of a debt-ceiling breach, investors might actually buy more Treasury bonds, running towards supposedly safe assets as they often do in times of market panic. This, weirdly, could be a worse outcome than a Treasury bond flight, since investors who held onto Treasury bonds during a panic might begin to regard those bonds as no less safe than bonds from other countries. America's bonds have long been thought of as a kind of global reserve currency – the safest possible thing to own. If that status goes away and the U.S. becomes just another country with bonds that may or may not default in the future, Davidson says we'll lose the advantages we've long enjoyed. "The U.S. economy’s peaks will be lower and recessions deeper; future generations will have fewer job opportunities and suffer more when the economy falters."
The central nervous system of the banking system might freeze.
Fedwire is one of the least-known, most important services on Earth. It's a clearing system, run by the Federal Reserve, that banks in America use to shuttle cash, stocks, bonds, and other assets back and forth between themselves. It processes trillions of dollars a day, and has been around for nearly 100 years. But it's not set up to allow defaulted Treasury bonds to flow through its system. According to a note from RBC Capital, excerpted by FT Alphaville, if the U.S. defaults on its bonds, Fedwire could "seize" entirely, meaning that banks and other financial institutions could run into real trouble very quickly.
The borrowing window might get jammed.
The Fed also can't accept defaulted Treasury bonds at its borrowing window, even if those bonds are still trading normally. Usually, how the borrowing window works is: banks or other financial institutions that need short-term funding bring the Fed some Treasury bonds or other very safe securities, and the Fed gives them a low-interest loan, using the safe securities as collateral. But if banks can't pledge Treasury bonds as collateral, it's going to be harder for them to qualify for borrowing, and harder to fend off disaster if it occurs.
The repo market might be squashed.
Every day, lots of Treasury bonds change hands through a short-term financing process known as a repurchase agreement, or repo. In the most traditional form of repo transaction, a seller will sell a Treasury bond to a buyer, while promising to buy it back in the future at a certain price. Repo transactions are found in almost every corner of the financial world, and in some ways, they're the glue that makes the markets stick together. And in a post-X-Date world, they get a lot harder. Just as they can't be used at the Fed's discount window, defaulted Treasury bonds generally can't be used as collateral in repo transactions. Without repo, banks and other financial institutions will be unable to fund themselves in the normal way, interbank lending costs will skyrocket, and a workaround will have to be arranged in order to keep the financial system functioning normally.
The bottom line: A debt-ceiling breach would be very, very, very bad.
Keep in mind that these are all hypothetical scenarios. Reality could be better, or much worse. The truth is that while we sort of know what a government shutdown would look like (since it's happened in the past), we have no idea what chaos a debt-ceiling breach could bring. If, in a month, we reach the X Date, run out of money, and are stuck in political stalemate, we'll be entering truly uncharted waters. And we'll be dealing our already-fragile economy what could amount to a knockout blow.
Saturday, September 28, 2013
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Friday, September 27, 2013
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"Disreputable if Not Outright Illegal": The National Security Agency versus Martin Luther King, Muhammad Ali, Art Buchwald, Frank Church, et al.
Thursday, September 26, 2013
What A Resourceful Fellow Our Dog Copernicus Is!
Last night Elena cooked a nice roast that we all loved. There was some leftovers. Elena ate a couple of pieces of meat this evening. I was on a day of seafood. The meat was left sitting on the stove. Our dog Copernicus sneaked into the kitchen. He silently got the leftover meat and quickly consumed it all. Elena discovered the vile deed of our dog. I was laughing. I have known for a long time that Copernicus is a very clever and resourceful fellow.
Wednesday, September 25, 2013
One Song That Describes My Life
Luah is doing a project for her college. She is making videos of various people. I shall be one of her subjects. She asked me to pick a song to be played in the background that described my life. I had to think about it a long time. I picked the theme from Dr. Zhivago. It is a tale full of brutality and danger but also a lot of love and hope.
Tuesday, September 24, 2013
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Monday, September 23, 2013
You Are Much Safer Now Flying On Airliners!
Last night I spent two hours watching some programs on the Discovery Channel about great improvements in aviation safety. I believe that we take for granted how safe it is to take a commercial airplane flight. Let me give you a few improvements over the last 30 years that make it safer when you are in the air as follows:
1) 16G passenger seat that better protect one if there is a crash.
2) New insulation in the cabin walls to prevent fires.
3) Major improvements in collision avoidance avionics.
4) Equipment on board an aircraft to detect micro burst of wind in deadly wind shears.
5) Concrete type foam at the end of a runway that stops an aircraft going off the runway.
6)Sensors at airports that make the job of air traffic controllers easier as every plane is seen in real time with its identification data displayed.
7) Devices used in fuel tanks to prevent sparks from igniting fuel and destroying an aircraft.
8) Devices used by ground crews to detect metal fatigue and problems with rivets.
This is one time that we taxpayers truly got value for money. FAA well done!!!
1) 16G passenger seat that better protect one if there is a crash.
2) New insulation in the cabin walls to prevent fires.
3) Major improvements in collision avoidance avionics.
4) Equipment on board an aircraft to detect micro burst of wind in deadly wind shears.
5) Concrete type foam at the end of a runway that stops an aircraft going off the runway.
6)Sensors at airports that make the job of air traffic controllers easier as every plane is seen in real time with its identification data displayed.
7) Devices used in fuel tanks to prevent sparks from igniting fuel and destroying an aircraft.
8) Devices used by ground crews to detect metal fatigue and problems with rivets.
This is one time that we taxpayers truly got value for money. FAA well done!!!
Sunday, September 22, 2013
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Saturday, September 21, 2013
Friday, September 20, 2013
Jack's South America: Asian Groups Dominate Brasil Oil Auction
Jack's South America: Asian Groups Dominate Brasil Oil Auction: September 20, 2013 1:37 am Asian groups dominate Brazil oil auction By Samantha Pearson in São Paulo ©Bloomberg The aucti...
Thursday, September 19, 2013
Edna Marie Muldovan Memorial Video
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Wednesday, September 18, 2013
My Beautiful Wife Elena
orelloha caricato una nuova foto: fai click qui per visualizzare la nuova foto.
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Tuesday, September 17, 2013
Jack's South America: Rousseff May Cancel US Trip
Jack's South America: Rousseff May Cancel US Trip: September 17, 2013 1:51 am Rousseff to decide if US visit will go ahead By Joe Leahy in São Paulo Dilma Rousseff is expe...
Monday, September 16, 2013
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Jack's South America: The Current Economic Woes Of Argentina
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Sunday, September 15, 2013
Saturday, September 14, 2013
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Friday, September 13, 2013
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Thursday, September 12, 2013
Wednesday, September 11, 2013
15 Years Ago Today I Went To Jail
15 years ago today I was arrested by a team of 6 US Marshals. I was not charged with a crime. I was charged with civil contempt of court. I was hauled to the Santa Clara County Jail. I was facing up to 18 months in Federal prison. Ironically the US Marshals who arrested me felt bad about what they had done. They got me an incredible criminal defense attorney named Nicholas Humy. He thought that my case was hopeless but took some big risks. Then three people stepped up and fought to get me released-Joao Santos, Djenane Santos and Louvern Costner. What they did was heroic. I ended up with a very light jail sentence and was able to start my life over again. Dear Nicholas Humy died of cancer two years ago. Joao, Djenane and Louvern are still doing well. Today is a sad day for most as we remember September 11, 2001. For me it is a joyous day because my life was saved by 4 wonderful and special people who helped me so much when I was helpless and facing the trillion dollar might of the state.
17 Years In The San Francisco Bay Area
17 years ago at this precise moment I was on a Greyhound bus somewhere in the high dessert of California. I was on my way to San Jose, California. I had less than $200 in my pocket, a cheap Timex watch, some very few cloths (mostly sweatsuits) and the manuscript of a book that I was working on called Laguna. I knew that my ex-wife was in the Bay area. I wanted to see the kids but found out that they never left Brasil. I hoped that a major newspaper reporter would help me with the book (His name was Gary Webb and he never did help me.) It was a courageous thing to do. It was a giant risk. It paid off quite well but it has been a very painful process.
Tuesday, September 10, 2013
Monday, September 9, 2013
Sunday, September 8, 2013
Facebook: "It's our last morning in Las Vegas. It's raining and cool for a pleasant change. After Elena's medical conference finished yesterday, I was worried about rain and flash floods north of Las Vegas. Elena insisted that she wanted to go to Valley of Fire state park. I grudgingly agreed to take her. We caught some rain on I-15 but things were beautiful in the park.We had a delightful afternoon and took some beautiful pictures. There was no rain. We came back to the hotel and had a delightful dinner at a Spanish tapas restaurant. We had great fun with the staff and socializing with other people. We saw a table full of beautiful women eating alone. They were surrounded by two large tables of very attractive young men eating alone. None of the men made any effort to meet any of the women. We leave to go home today.Ah it has been an incredible trip!!! We needed the rest. Monday it's back to the world of hard work!!!!"
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'via Blog this'
Friday, September 6, 2013
In Praise Of LasVegas
Elena and I find ourselves in Las Vegas for a medical conference. We are fortunate to be at a beautiful hotel/resort; The Cosmopolitan.
Elena is very busy with a medical conference on chronic pain. She's learning lots of new things that will help her to serve her patients better.I find myself in the enviable position of "having time on my hands." Of course I have spent time by the pool, ate some great meals, and saw some incredible sights.
Elena and I do not gamble except on the stock market. We look with fascination as people gamble. We both understand that old saying: "The house always wins." Most of the people in the casino have scant chance of winning but they keep coming.
I have spent time reflecting on the miracle that this city is. Elena gave it the nickname of Saudi Arabia because it is so hot and desolate.
This is a remote dessert area with nothing much going for it. Some desserts have billions of barrels of oil underneath. Some desserts have minerals under them or a strategic location. The area around Las Vegas has none of these attributes.
How did this modern and rich city arise in such a hopeless area? Elena posed this question to me. I answered her that it began with a few people who had a vision.Gambling was illegal in most of the rest of the USA. They made it legal in Nevada.
What followed was an invasion of gangsters who got the gaming business started. The Binnion family also started casinos. They attracted people with big name entertainers. Howard Hughes then made Las Vegas his home and bought up several casino properties. Young innovators like Steve Wynn came along and turned this dessert kingdom into a world class venue.
Las Vegas is much more than "Sin City" or a mecca for gambling, prostitution, etc. It is also a place to just come,relax, and have fun. The people are friendly and nice. They make you feel at home.
Monday, September 2, 2013
Israel Fears That It Is now Alone To Stop Iran's Nuclear Program
GLOBAL INSIGHT
September 2, 2013 1:12 pmIsrael fears US leaving it alone to stop Iran nuclear programme
Lack of US resolve on Syria chemical weapons sets a bad precedent
When Barack Obama visited Israel in March, he made a speech in Jerusalem – virtuosic in parts and cloying in others – meant to endear him to an Israeli public which felt it neither knew nor trusted him much.
Atem lo levad (“You are not alone”), he intoned in American-accented Hebrew, channelling the same spirit of solidarity that John F. Kennedy invoked when he declared “Ich bin ein Berliner” in blockaded West Berlin in 1963.
ON THIS STORY
- Kerry – US has proof sarin used in Syria
- Global Insight Western disarray gives succour to Assad
- Arab League urges UN blessing for action
- Iran boosts uranium enrichment capacity
- Iran’s new president calls for ‘serious’ nuclear talks
ON THIS TOPIC
- Time to talk bombing will not stop an Iranian bomb
- Obama ready to cut US nuclear weapons
- Ayatollah Seyed Salman SafaviEnd the nuclear stand-off
- N Korea signals openness to talks
GLOBAL INSIGHT
Israelis are now recalling Mr Obama’s speech ruefully after his decision to refer any military action against Syria to Congress. Asked afterwards about how the decision made them feel, many offered up this word: “alone”.
Their worry is not that Israel is being left alone to cope with Syria, whose war Israel’s government and most of its people want no direct part in.
The fear – and it is a big one – is about the message America’s perceived wavering on Syria sends to its bigger and much more powerful ally: Iran.
Benjamin Netanyahu, who has made containing the Islamic republic’s nuclear programme the defining issue of his premiership, has said repeatedly in recent days that Syria is a “testing ground” for Iran.
Any lack of US resolve over disciplining Bashar al-Assad’s government for crossing “red lines” on chemical weapons use, Israelis feel, sets a bad precedent for efforts to stop Iran from developing a nuclear bomb. Israel was already worried western resolve to contain Iran’s nuclear ambitions was ebbing after the election of relative moderate Hassan Rouhanias president.
Mr Netanyahu, mindful of Israel’s delicate position in a region where Mr Assad or Hizbollah might respond to a US strike by attacking it, has told his ministers not to talk to the media about Syria.
However, Naftali Bennett, economy minister and head of the far-right Jewish Home party, gave one insight into official thinking on Friday – before Mr Obama’s speech, but after Britain voted against military action – when he wrote on Facebook: “The international stuttering and hesitancy on Syria just proves once more that Israel cannot count on anyone but itself.”
Commentators in Israel put it in earthier terms when they chided Mr Obama by quoting a line from Sergio Leone’s spaghetti Western, The Good, the Bad and the Ugly: “When you have to shoot, shoot – don’t talk”.
“You hear more and more people in government saying, ‘Can we really rely on the US to stop Iran?” said Mike Herzog, a retired Israeli general and international fellow with The Washington Institute for Middle East Policy. “If they can’t take a decision on a red line in Syria, why should we think they could do so on Iran?”
US resolve in Syria, Israelis say, has proved weak on a chemical weapons red line that according to the British intelligence dossier was crossed at least 14 times before the attack outside Damascus that prompted a hesitant US call to arms.
If [the US] can’t take a decision on a red line in Syria, why should we think they could do so onIran?
- Mike Herzog, The Washington Institute for Middle East Policy
Whereas gruesome news pictures of gasping victims provided apparent visual evidence that chemical weapons had been used, the trigger for action in Iran is more fungible and open to interpretation, and Israel and the US define it differently.
The US has said it would not accept a nuclear Iran, but Israel thinks this is too fuzzy. Mr Netanyahu, speaking at the UN last September, said that Iran must be stopped before it had amassed enough 20 per cent-enriched uranium for a single bomb. Israel says Iran has not reached this but is taking broader actions such as building centrifuges that would make it easier to cross the nuclear threshold quickly.
“Red lines don’t lead to war; red lines prevent war,” Mr Netanyahu said in his UN speech, in which he brandished a cartoon of a sputtering bomb. “I believe that faced with a clear red line, Iran will back down.”
Israelis are this week more doubtful on that point, with many saying that US prevarication on Syria has weakened the red line’s deterrence. Some worry it is now more likely that Iran will cross it and if forced to act, Israel may need to go it alone.
“Will the US back its own red lines and do something about Iran?” asked Yoel Guzansky, a researcher for the Institute for National Security Studies. “The answer after Obama’s speech is no – we are alone. That’s a very basic feeling – this is what people here think.”
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