International Forecaster Weekly

Ponder Me This

If we hit the debt ceiling and they decide “nope, we’re not going to increase it”….what happens? Again, we don’t truly know. There are things that the President could do, but frankly none of them are completely legal. The one choice would be that we simply don’t pay our bills.

Bob Rinear | October 2, 2013

I don’t know if it is because I’m getting older, or that there’s so much more instant communication, but it seems to me that the speed of the issues that come at us lately is astounding. It’s like the economy is one of those old fashioned boardwalk attraction “bumper cars”, bouncing off this disaster and careening into the next, only to crash head on into the next.

On Monday night, all “non-essential” people were furloughed in the Government as the Republicans and the Democrats each stood their ground and decided to put on some Masterpiece Theatre. While that is indeed newsworthy, it is just yet another in a long and growing string of negative newsflow that bombards us almost daily. For instance, before we even get this Government shutdown solved we’ll be dealing with the debt ceiling debates.

Some people thought that these were one and the same. Well it isn’t. Basically the Government shut down is when our Congress can’t come together on appropriations bills that are known as “discretionary” spending. So while the core expenditures like Social Security and paying our troops, and Medicare continue to function and be funded, the “non-essential” stuff comes to a halt. One of the sour grapes jokes that goes around is that if the 800,000 people getting furloughed are non-essential, why do we have them??

We have them because we have a parks department. We have them because we have National museums. Sure there’s a lot of agencies and spending that is totally bogus and should be done away with, but all in all, the Government shutting down discretionary spending isn’t the end of the world. It is an inconvenience. We’ve gone through these charades before. But the actual debt ceiling debate, now that one is a whole different story.

We’ve never “not raised the debt ceiling”. So just what is that anyway? Well, come on or about October 17, the Government will reach the legal limit of how much it can borrow to fill in the gap between what we spend and what we take in. They’ve had a limit set on the “dollar figure” that they can borrow, and we’ll reach that very soon. Okay, so then what?? We don’t know. Each time it’s happened they just hike the debt ceiling and the game goes on.

If we hit the debt ceiling and they decide “nope, we’re not going to increase it”….what happens? Again, we don’t truly know. There are things that the President could do, but frankly none of them are completely legal (not that this would matter with this guy). The one choice would be that we simply don’t pay our bills. Well obviously that isn’t such a hot idea since it very well could spawn a global economic crash. So, we’d probably get one of two choices. Either Obama just does an executive order and tells the treasury to ignore the ceiling, or he commands certain items to be funded. Neither one is completely constitutional, and as I said, it hasn’t ever happened before. So, once we’re past this Government shut down, we need to see if they’re going to violate the next hurdle. That will be interesting to see.

Sometimes the frustration that people feel is so palpable, it bubbles out. I captured this little blurb on Tuesday morning as a very bright guy was melting down…

“Our Broke-assed government shuts down because it can’t pay its bills (Govt never pays its bills, just rolls over existing debt for new debt) Meanwhile, the zero credibility, gaping wide mouth politician parasites -who do the bidding of the unprosecutable organized banking crime syndicates who make their money through mass fraud, manipulation and shameless burgling of the public treasure- get paid. To add further insult, the parasitic crony’s get Rolls Royce health care, we get Obamacare. The abject stupidity of this nation is immeasurable. “

I can certainly understand his frustrations. Things are really rock bottom when you put all the pieces together.

But while this Government shut down and then the debt ceiling debate are what’s in our face right now, there’s so much buzzing around that sometimes my aging mind is boggled. We’ve gone through some really lumpy things lately, remember? How about how close we just came to bombing Syria? That was big news. Chemical weapons? Putin upstaging Obama? Then it was the Fed “taper” issue. Well consider this. We’re barreling head first into earnings season. While that seems like small potato’s, it really should be looked at in the context that our poster from above might place it.

Our market is just a few hundreds of points off its all-time highs. Meanwhile as I write this, more than half the Government is sitting idle because we’re broke. Then next week we’ll have to debate the debt ceiling. Okay that simply means that once again, we spend more than we make. It sounds sort of ironic, no? Yes. But consider corporate earnings that are coming up. Did you know that we have had more companies warn for this upcoming quarter than only Two other times in history? According to Reuters, there have been 5.1 negative outlooks issued, to only 1 positive. Read again, 5 to 1 negative. Other than the 6.3 to 1 ratio posted for the second quarter, you have to go all the way back to 2001 to see anything that ugly.

Chemical weapons, Syrian bombings, Naval Yard active shooters, Nigerian mall terror massacres, Fed tapering, Government shut downs, debt ceilings, and now lousy corporate outlooks. All this in what…about a month’s time span? This is what I mean when I said that it seems like the market just slams into one bad news event after another. And it is because of all this bad news…that the market is up this year. Yes folks the ultimate irony of all is that they’ve rigged the market to go up, in the face of the ugly realities. It is their last hope, their saving grace.

I have posited that we will indeed have a year-end romp in the market, that takes us to all-time new highs for the end of the calendar year. The only question was whether we’d get a true correction over the Government issues first or not. That still isn’t terribly clear, although it is looking more like they’re going to ignore all this too. While we still have a couple weeks here in October that could be pretty bumpy, Once we’re past all this noise, I don’t see anything that will stop them from partying right into year end. Ironic and bizarre? Absolutely. Fed fiat money trumps ALL else.   But in the twisted year of 2013, it is the normal.