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The troops will get paid on Tuesday, but the check after that could come in the form of an IOU if the nation defaults on its debt obligations, Treasury Department officials said. Default on top of the government shutdown would cancel out the hastily-crafted legislation that brought back furloughed Defense Department civilian employees and allowed for the payment of back pay, death benefits, incentive pays, re-enlistment bonuses, veterans disability benefits and survivor benefits. All would be eliminated if Congress and the White House fail to reach agreement on raising the debt ceiling to avoid default on Oct. 17, Treasury Secretary...

After a weekend of meetings, there is still no agreement on the debt ceiling or budget. debtceilgst The reaction? US credit default swaps rose this morning. But notice they are still lower than they were on October 10th. uscds101413 The US has the fastest rising CDS. Simply because the alleged default on US sovereign debt isn’t hurting any other country. sovcds101413 So, President Obama and Congress are digging in their heels on cutting spending and debt. Even though Germany is cutting back on its debt. debtdrop Germany was able to lower its debt-to-GDP ratio. Why can’t Congress and Obama agree...

Alternate Headline: "Your Move, Mr. Cruz." There is talk of a deal being worked out this afternoon, but I thought I might mention that even if a deal is worked out today or tomorrow, we are almost certainly going to find out what happens when the debt ceiling isn't raised by Thursday. Quite simply, there isn't enough time for the Senate to consider a bill before the Thursday deadline . . . unless there's unanimous consent to waive the Senate rules. Here's what has to happen before the Senate can pass a bill raising the debt ceiling. (1) The bill...

In the film “West Side Story,” Puerto Ricans sing “America” and pronounce that “Puerto Rico Is In American Now.” If they redid “West Side Story,” they would have to sing “Detroit Is In Puerto Rico Now.” Puerto Rico has a negative outlook from ratings agencies and is rated Baa3 by Moody’s. prcwdes Puerto Rican municipal bonds are collapsing in price. Puerto-Rico-commonwealth-2033 While the Puerto Rican municipal bond 20 year yield has popped to over 10%. PR-20-year-yield Puerto Rico credit default swaps have increased recently (note the “Batman ears”). prdcs At least Puerto Rico isn’t in the Argentina area of CDS...

After a weekend of meetings, there is still no agreement on the debt ceiling or budget. debtceilgst The reaction? US credit default swaps rose this morning. But notice they are still lower than they were on October 10th. uscds101413 The US has the fastest rising CDS. Simply because the alleged default on US sovereign debt isn’t hurting any other country. sovcds101413 So, President Obama and Congress are digging in their heels on cutting spending or debt. Even though Germany is cutting back on its debt. debtdrop Two different philosophies: austerity to balance sovereign budgets (Europe) or spending like there is...

One thing I haven't seen discussed or brought up is the fact that any shutdown, slim down or even default is repairable and only a temporary problem. But the creeping (well, it's past creeping now) socialism being brought about by Obama's executive orders, his unimpeded co-op of enumerate Congressional powers, his decisions to not enforce laws he doesn't like -- those are irreparable. Government rarely (peacefully) goes backwards. Taxes never go down and agency power is always expanding behind the backs of their congressional oversight. So bring on the shutdown, slimdown or default. Those can be fixed. Use those as...

Treasury Secretary Jack Lew slammed Republican arguments that failure to raise the debt ceiling doesn’t guarantee default as based on “faulty logic.” This is despite the fact that Moody’s, the internationally respected financial rating service, supports the GOP case. “They say that maxing out our borrowing just means that we will have to cut spending somewhere, that we could continue to service our debt while we make cuts elsewhere,” Lew recounted. “What they are forgetting is that the decision on whether to default or cut other spending is in our hands, not theirs.” Calling the failure to raise the debt...

House GOP members are meeting at Capitol. The meeting is about how to increase the debt limit for the USA. If Democrats and Republicans cannot reach an agreement, the USA is head for … default! 2012-movie-431x300 (1) It is true that the US is at (or actually a little past) its statutory debt limit. debtceilgst But what do credit default swaps, the price for insurance against sovereign default, tell us? First, the 5y CDS did rise after the specter of default reared its head. But fell towards the end of the week as rumors surfaced that President Obama was willing...

“There is precedent for a government shutdown,” Lloyd Blankfein, the chief executive officer of Goldman Sachs, remarked last week. “There’s no precedent for default.” How wrong he is.

The rhetoric in Washington DC and the media is … silly. Here is a chart of Federal government receipts and Federal government expenditure on interest for Treasury debt. fedrecifedint Does that look like the US can’t afford to pay its debt? Of course not. The problems is the voracious spending in DC which no one seemingly wants to stop. Now, if I plot Federal government current receipts against Federal government current expenditures, we see a different picture: its the spending that’s the problem. govtrevexp You can see in the picture that the much vaunted reduction in the deficit was a...

U.S. Treasury Secretary Jacob J. Lew warned Congress that “uncertainty” over the debt limit is starting to stress financial markets and trying to time an increase to the last minute “could be very dangerous.” Lew was speaking in testimony prepared for a hearing before the Senate Finance Committee today. debtceilgst But not the growth rate in debt or entitlements? Obamacare and other entitlements will lead to even more explosive debt growth in the US. debtprojection7 The US and much of the world has already been experiencing explosive debt in both the public and private sectors. See this link for a...

<p>One of the nation’s top credit-rating agencies says that the U.S. Treasury Department is likely to continue paying interest on the government’s debt even if Congress fails to lift the limit on borrowing next week, preserving the nation’s sterling AAA credit rating.</p>

The International Monetary Fund Oct. 8 lowered its global growth forecast for this year to 2.9 percent and to 3.6 percent in 2014, from 3.1 percent and 3.8 percent it had in July. The U.S. economy is “at the center of events,” the fund said. The damage to the world’s largest economy from a longer federal government shutdown “could be quite harmful” while “the failure to promptly raise the debt ceiling, leading to a U.S. selective default, could seriously damage the global economy,” the IMF warned in its new “World Economic Outlook”. Bear in mind that the IMF has had...

It is fascinating to watch the game of chicken being played in Washington D.C. Both sides on the budget war have drawn lines in the sand. President Obama and Senate Majority Leader Reid refuse to negotiate and have shut down the Federal government (sort of). House Republicans demand that Obamacare carveouts to political friends, Congress, etc. be ended or everyone be given a waiver from Obamacare. Regardless of which side of the fence you line up on, here are the facts. In 2014, $2.16 trillion of Federal government debt matures or rolls over. Now, THAT is a big Twinkie! usdebtdist...

While the world's largest hedge fund, the Fed, may not care about the performance of its "bad bank" assets, and thus is largely ambivalent if the US Treasury defaults on the $2 trillion in US paper held by Ben Bernanke, others don't have the luxury of merely printing away any incurred MTM losses. Such as America's largest foreign creditor China, which at last check held at least $1.277 trillion in US Treasurys, which after realizing with a substantial delay that the US Congress is not precisely a "rational actor" and its bonds may be materially impaired in the case of...

As many observers have noted, the dysfunction in Washington is on the verge of becoming a full-blown crisis. A handful of extremists in one political party have become so convinced of their own brilliance and rectitude — and so frustrated by their inability to persuade the rest of the country of it — that they are threatening to cause the United States of America to default if their demands aren't meant. This is extortion, plain and simple. And the Obama Administration is right not to give into it. If it becomes legitimate for a small group of politicians on either...

In the old days, if you wanted to see master propagandists at work, you looked to Moscow, where none honed the craft as crassly as the boys in the Kremlin. The Soviets were so excellent at manipulation and disinformation, at agitation and propaganda (read: agitprop), that they had a government department that specialized in the work. Entire elements of the arm of the state were employed in the ignoble task.Here at home, Communist Party USA wasn’t too shabby either. [SNIP]...This tactic is precisely what Barack Obama and his allies are doing right now. Obama’s exploitation of the government shutdown (never...

It’s impossible to default on the debt——years down the road, maybe Average monthly interest costs are $18 billion….. we take in on average $225 billion. By law, the president must pay interest first before anything else. In addition to interest we must roll over the $550 billion of maturing debt each month. Newly issued bonds replace maturing bonds with no net change in total debt outstanding. If the Chinese and other investors won’t purchase them, Federal Reserve Chairman Bernanke will just buy them for the Fed’s account. When confronted with money problems, adults make decisions and set priorities. We pay...

After the housing crash of 2008, millions of US borrowers were suddenly plunged into a negative equity position of their homes where the amount they owed to lenders exceeded the value of the property. The problem was so bad that it has motivated cities to consider eminent domain to seize the underwater debt of borrowers (as in Richmond and San Bernardino California). Here is a recent map of negative equity from Zillow. zillowmapofnegeq These borrowers have nothing on Uncle Sam. Uncle Sam now owes $17 trillion to bondholders. GFDEBTN_Max_630_378 (3) Currently, Uncle Sam has public debt equal to 100.46% of...

Before I went on The Willis Report on Fox Business to discuss the latest FHA bailout, reporter Rich Edson discussed the pending government shutdown. That is, The House passed a continuing resolution without Obamacare funding, the Senate put Obamacare back in the continuing resolution, and now the ball in the House’s court with only days to go …. to government shutdown! Zero Hedge has a nice summary of the negatives associated with a government shutdown. Suffice it to say, it is all about the crippling Obamacare legislation. Regardless of the government shutdown or not, labor force participation rate will continue...