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10.7.13 Futures


US Futures are deep in the red, as we begin the third second week of the government shut down.

In theory, some 25% of the US economy may soon end up off line. We are not there yet, but that is the short term negative. The worst case scenario is a U.S. Default potentially a catastrophe dwarfing September October 2008.

It will be interesting to see how this plays out, as we do not really know what the dissidents want. (I suspect they are not all that familiar with game theory). As of now, Boehner is saying the House will not have a chance to vote on a clean Debt Limit Bill.

Regardless, investors hope this slow motion train wreck gets averted prior to any actual collision.



Category: Markets, Politics, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

21 Responses to “Look Out Below, Government Shutdown 2nd Week edition”

  1. rd says:

    “I suspect they are not all that familiar with game theory”

    Great line.

    I also suspect they are not that familiar with the budget or Obamacare either. They just know that whatever the President wants or will agree to must be bad by definition.

    I just hope that they understand what the term “economic suicide” means. Unfortunately, I think the DJIA-S&P 500 are going to have to stage a mini-bear over the next two weeks to make them blink. As long as the markets stay up, they think the doomsday discussions about default are just people bluffing.

    It will be interesting to see if Boehner can convince them to put anything concrete on the table that would be remotely acceptable to Obama and Reid to even have a discussion about. The discussion framing still seems to be Sunday talk show talking point rhetoric, not anything that could be put in a bill.

    • cowboyinthejungle says:

      “Unfortunately, I think the DJIA-S&P 500 are going to have to stage a mini-bear over the next two weeks to make them blink. As long as the markets stay up, they think the doomsday discussions about default are just people bluffing.”

      Interesting point. Normalcy bias tells us this will get resolved at the last minute. If investors/markets don’t blink, why would these hostage-takers concede? In a world where every warning is discounted as liberal media Obama worship, what would it take to get through to the TP caucus? A market correction would be on the very short list of events, I imagine.

      • rd says:

        S&P at 1655 at the close today.

        Technical support levels are starting to breach quickly. The market may be getting ready to signal to the pig-headed idiots.

  2. Herman Frank says:

    Good morning America!
    There’s a saying “Beware if God answers all your prayers!” And look at what we have this morning?! The miraculous shrinking of the Government! “You asked for it, you’ve got it!”

    OOPS … you mean to say it also means we have shrunk the US economy by 25%?

    A cry come out “YES!”
    Now an image of The Joker (from the Batman movie) appears and starts gesticulating with his arms with a mad grin on his face. “And this is only the beginning! We’ll shrink some more!!! Wait for the moment that we stop the payment of social security! We should get a solid 30% withering out of that!”

    And he goes dancing down the street, passing by mirrors, passing through smoke. One moment ten, one moment none. A plume of smoke rose from Wall Street, a tsunami gathered momentum.

  3. horseinalfalfa says:

    Third week? Didn’t this start on 10/1?

  4. rd says:

    An interesting article here on where some of the military spending unimpacted by the shutdown goes:

    Feeding troops aborad is just a small part of the Pentagon budget so there are lots of companies like this out there for various aspects of logistics.

  5. stonedwino says:

    So how’s everyone feeling about the attempted GOP Coup D’Etat? After catering to the batshit-crazy, ignorant and stupid for decades, those lunatics have taken over the asylum, bankrupted our political system an are about to take the whole country if not the world with them, as all the lemmings jump off the cliff…how could any sane person continue to vote & support the Republicans…

    This is Whig Party redux…

  6. Concerned Neighbour says:

    Obama sure is intransigent for agreeing to pass the Republican/Romney health care law four years ago, and then having the gall to expect it be funded. He sure is intransigent for winning not one but two elections on the issue, and expecting Republicans to respect the electoral process. He sure is intransigent for time and again abandoning his base in past negotiations to cave to Republicans, while the Republicans invariably bend a fraction in return.

    Contrast that with the Republicans, who only insist that Obamacare be shelved, taxes never increased, no gun control, and not a penny removed from the military industrial complex. Yes, lot’s of room for compromise their.

    Aside from their puppet masters – a rancid cocktail of corporate elite and uneducated simpletons – who is buying this crap? They are political terrorists, plain and simple. It’s disturbing they aren’t totally ashamed of themselves, as it indicates they may indeed be willing to go the distance in turning the land into a full-fledged Idiocracy.

    Friedman had it right in his column this weekend. Whether you are an Obama supporter or not, you need to support him in this stand if you give a damn about democracy.

    • honeybadger says:

      Concerned neighbor, I’m with you on the first bit “Obama sure is intransigent for agreeing to pass the Republican/Romney health care law four years ago”

      The Affordable Heath Care Act is firmly in line with core Republican values. If the party cared more about its soul than short term victory, …

      But “the Republicans, who only insist that Obamacare be shelved, taxes never increased, no gun control.” Where did the gun control bit come from? Don’t you see that “gun control” is a red herring? Go after the factors which drive a man to do harm with a gun, that is the root of the problem. Prohibition didn’t work for alcohol or drugs, why do you think it would work here?

      You also forget that we do have very strict gun control in many states and cities, which also happen to be cities with high crime rates… coincidence is not causality, but lack of coincidence is strong evidence for lack of causality.

  7. cuprous says:

    Gosh if only they would hold out for something substantive like a balanced budget amendment. Alas fiscal profligacy is the hallmark of both parties with only some quibbling on a few tens of billions here and there.

    Poor Bernanke must be having acid reflux. “I spent trillions to pump the markets this much and these idiots are letting out the hot air!”

  8. digistar says:

    This is a political show. Sit back, relax and watch our ‘leaders’ make themselves look even more foolish than normal.

    Given our country’s bad behavior toward many parts of the world over the last 50 years, it might be a relief to the rest of the world if we ran off the rails – as long as we don’t invade someone to distract the 99% from what is being done to them.

    “The worst case scenario is a U.S. Default – potentially a catastrophe dwarfing September October 2008″. Well, that might be the just what the doctor ordered to get us free of the shackles of our plutocratic political/economic situation. Yes, it might hurt a lot of innocent people, but I don’t see any effective AND painless way of generating enough enthusiasm for dismantling this gilded age and replacing it with a new new deal.

  9. I think the market volatility increasingly has less to due with shutdown and more with default since a deal on the first will be part of a deal on the second . . . a default has much more serious consequences and that date is looming with public positions hardening over the weekend. It will be very interesting to see where we are by the end of the week.

  10. Thalamusless says:

    The correct course of action IMO is to let the government stay shutdown. They are required to prioritize the debt payments, and there’s plenty of money for that, so a very useful cleansing would occur if the government shut down long enough (there would be no default legally). The problem is we are dependent on the government, which isn’t what the founding fathers intended, so the increased self-sufficiency created by a shut down would be a good thing for our country.

  11. zeb1556 says:

    Interesting. But both parites are showing ingnorance. Some may view the Republicans as suicidal at this moment, but unfortunately, both parites are in the same boat, just rowing in different directions and ignoring the leaks in their shared system. Consider the reported debt, some 17 trillion, now consider that this number may be twice as large as reported. Why? Consider the spending by the FED. The last GAO audit of the FED showed a debt level close to the reported public debt. So, while Republicans may seem suicidal, one must consider if the deed is already done when it comes to going over a cliff. Sure a downgrade would be very bad during a weak recovery period, but what do you do in a situation when a family just keeps trying to spend its way out of debt. Both parties should suffer major political defeats at the polls. Oh wait. The public is in the dark, they don’t see the danger and they will not pull together, so next election expect more of the same politically minded people to be elected. Faces may change but the failing politics will remain the same. So what to do? Congress seems to be in a shelter in place mode, no one will stick their neck out lest their own party kicks them, much less the opposition. We need leadership that will talk and compromise. The real danger is not the economy, it is the danger to our political system. God help us. Oh, sorry, I forgot, he is polittically and socially incorrect and we banned him from helping us. SO, yes look out below.

  12. irondoor says:

    By “bankrupted” do you mean as in “can’t pay the interest and the promised entitlements without borrowing” or do you mean “current and unfunded liabilities greater than marketable assets (ignoring the Fed’s printing machine)”?

    The can has been kicked to the extent that the end of the road may be in sight. The Republicans who are refusing to go along to get along are reflecting the feelings of the majority of their constituents who are saying that if now is not the time to make meaningful changes in how the country manages its finances, when will that time come? Is it in 5 years? 10, 20 50, never? We’d like a simple answer, since “later” won’t cut it. We have to stop the madness and the insatiable demands on the Future to least give our children and grandchildren an opportunity to live in a country where the leaders understand and care about the math of compound interest.

    I understand that the majority of the citizenry don’t care about this as long as the checks and freebies keep coming. I also understand that the majority of the remainder benefit and profit from the continued flow of virtually free funds issued by the Fed and passed through the Treasury. Generally speaking, then at least 90% of the citizens (ignoring the illegals) are for the continuation and acceleration of the status quo. Being in the minority of the minority is hard and virtually impossible work stopping the flood. But, to paraphrase Gen. Patton: “When your grandchildren ask what did you do in the war, granddaddy, you can tell them that at least you didn’t shovel shit in Louisiana”.

  13. pekoe says:

    It is hard to get 51% of the vote If you only really represent the economic interests of 1% (or I would argue 0.1%) of the people. It is the central problem for Republicans. It is the same problem that ruling elites faced in 1930′s North America and Europe when economic elites supported various nut jobs to try to hold back a socialist response to the economic challenges of those days. They roped in everyone who cared about something more than their economic self interest—racists, homophobics, xenophobics, the religious intolerants, militarists, super-nationalists, etc. I learned in school that this did not work out so well…

  14. stonedwino says:

    Kudos Pekoe, for being a student of history… pays to know what most don’t, about history.

  15. Ivana Puke says:

    I’m going long on pitchforks and torches.

  16. FrViper says:

    Perhaps this is a great time to analyze what gov’t functions are redundant and/or not required to sustain our economy? It is time to thin out our gov’t employment, as we periodically do in private industry. One way would be to prioritize the work force and add back 20%/bi-weekely until we see what is still in trouble?