Mish's Global Economic Trend Analysis |
| Posted: 29 Sep 2013 03:31 PM PDT The AP comments How budget showdowns could squeeze the US economy. The story is nearly all hype. Let's take a look. Q. What exactly will happen within the next days and weeks? A. The most urgent deadline is for Congress and the White House to agree to keep funding the government after the current budget year ends Monday. Otherwise, some of the government would have to shut down. The House and Senate are considering bills to fund the government past the deadline. But House Republicans want to cut off funding for President Barack Obama's health care law as a condition of passing the spending measure. Senate Democrats and the White House have balked. Unless one side essentially blinks, a partial shutdown of the government will occur. Mish: That is accurate so far. Q. What about the federal borrowing cap? First of all, what is it? A. It's a legal limit on how much debt the government can pile up. The government accumulates debt two ways: It borrows money from investors by issuing Treasurys. And it borrows from itself, mostly from Social Security revenue. Mish: It's important to note there is no social security fund whatsoever. Every penny and then some has been borrowed and spent. Here comes the hype. Q. What if Congress can't agree to raise the cap in time? A. It could be disastrous. No longer authorized to borrow, the government would have to pay its bills only out of the revenue it gets from taxes and fees. This would force the government to immediately slash spending by 32 percent, the Bipartisan Policy Center estimates. Most analysts think the government would delay paying each day's bills until it had accumulated enough money to pay them all. Even worse, the government could miss interest payments on Treasurys, triggering a first-ever default by the U.S. government. U.S. Treasurys are held by banks, governments and individuals worldwide. Ultimately, a prolonged default could lead to a global financial crisis. At the same time, Social Security and other benefit payments would be delayed. Government contractors might not be paid and would likely lay off workers. Paychecks for military personnel could be delayed. The government actually reached its borrowing limit back in May. Since then, the Treasury has taken a variety of measures to avoid exceeding it. But the cash generated by those measures will run out sometime between Oct. 22 and Oct. 31, the nonpartisan Congressional Budget Office estimates. The date isn't exact because it isn't possible to foresee precisely how much revenue the government will receive and when. Mish: The following AP statement is preposterous "Most analysts think the government would delay paying each day's bills until it had accumulated enough money to pay them all." I am not aware of any analysts who have stated the government would delay paying all bills until it could pay them all. Moreover, the suggestion that "the government could miss interest payments on Treasurys, triggering a first-ever default by the U.S. government" is equally nonsensical. US treasuries would be the last thing that would go unpaid. Q. Will the economy escape harm if both deadlines are met? A. Probably. But even brinksmanship can have consequences. The last major fight over the borrowing cap, in the summer of 2011, wasn't resolved until hours before the deadline. Even though the deadline was met, Standard & Poor's issued the first-ever downgrade of long-term U.S. credit. That, in turn, led to a 635-point plunge in the Dow Jones industrial average the next day. In August that year, consumer confidence plummeted to its lowest level since April 2009, when the economy was in recession. Spending at retail stores weakened. "The fallout nearly caused the fragile economic recovery to stall," says Mark Zandi, chief economist at Moody's Analytics. Mish: The report goes on and on blaming everything but hornet attacks on what happened in 2009. I call it's ridiculous speculation at best. And the hype continues ... Q. All this sounds pretty scary. Why aren't financial markets panicking? A. Stock prices have fallen in six of the past seven days, partly because of the looming deadlines. But the price declines have been modest. Many investors likely feel they have seen this movie before and know how it ends: with another last-minute deal. "After several rounds of fiscal brinksmanship ... markets may be somewhat desensitized to the headlines," Alec Phillips, an economist at Goldman Sachs, wrote in a note to clients. Mish: It's not scary at all, but the AP sure did its best to make it sound that way. A partial shutdown would hardly be disastrous. In fact I welcome such a shutdown as noted in Government Shutdown is a Fantastic Idea. Fantastic Idea If you think that a government shutdown is a fantastic idea (I sure do), then please contact your elected representatives and let them know. But don't expect anything to come of it. After all, the money will last until the end of October, and that is a long time in politics. Of course, to keep the government running now, the treasury is already borrowing against Social Security funds that are already spent! That's how absurd the setup is. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Giant Deadly Hornets Kill Dozens In China; Venom Dissolves Flesh and they Can Spray It Posted: 29 Sep 2013 11:22 AM PDT I have received hundreds of emails regarding my post Attack of the "Digger Bees". Many suggested getting an EpiPen® (epinephrine) Auto-Injector for Liz and we will do that. Many pointed out that "digger bees" are not bees but rather wasps. That is something I knew but did not mention in my post. I responded to some individuals that I like bees, and even have a "humble bumble" home for bumblebees, and I put out nests for mason bees. With that backdrop, some of you may be interested in Giant Deadly Hornets Kill Dozens And Injure Hundreds In China. Deadly hornets have killed at least 28 people in China following a string of recent attacks that have injured hundreds.Japanese Hornet Documentary The documentary is a lengthy 45 minutes, but some may find it interesting. Link if video above does not play: Japanese Hornet Documentary. Those giant "hornets" look like giant yellow-jackets to me. But yellow-jackets and paper wasps look alike. About.Com explains differences in a report on Wasps, Yellowjackets, and Hornets. The vast majority of bees and wasps in our world pose no threat to people. Most prefer to go about their business, parasitizing or preying on other insects. The social wasps of the family Vespidae, however, can be a downright nuisance. Vespid wasps include paper wasps, yellowjackets, and hornets, all of which will defend their homes vigorously should we disturb them. Worse yet, they have a tendency to build their homes in the places we like to spend our time, so there's a good chance you'll encounter them.Behavioral Differences Between Wasps, Yellowjackets, and Hornets  True Bees The above table neglected bees. Honeybees, bumblebees, and mason bees, etc., go after pollen. The things you see flying around at picnics, garbage cans, and especially sweets and sodas are yellow-jackets. They are an outright nuisance, and can be deadly. As far as "dissolving flesh" goes, I can actually attest to that. On one hand I was stung three times and skin was gone in all three places. Other stings were simple swollen and itchy for over a week. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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