March 15, 2015: US Comes up against $18T Debt Ceiling

[JohnyMac]

It looks like our debt ceiling will be hit on March 15, 2015.
This article fromBloomberg lays out our six options...

On Sunday, the debt ceiling returns to America. The $18 trillion borrowing limit will be reinstated after a temporary reprieve, and lawmakers in Washington will once again have to solve the problem that won't die. Many options are on the table, of course, and at least one analyst has revived talk of minting a $1 trillion platinum coin.

For those who don't recall, some people believe that U.S. law allows the Secretary of Treasury to mint platinum coins of any denomination, without asking Congress for approval. The idea was floated several years ago, during past debt limit standoffs, that the Treasury could simply mint a single coin worth $1 trillion (or more) and then walk down to the Federal Reserve and deposit it to pay off bills. It sounds crazy, but it has received a lot of discussion, and not just in the comments sections of blogs.

A report out this morning from Guggenheim Securities reminds us that this option is still on the table. It's No. 6 in a list of possible outcomes for the upcoming debt ceiling fight. The full list of options are:

1) A "clean" vote on the ceiling attached to no other bills or issues;

2) A GOP-Obama compromise;

3) Obama make an executive action or invokes the 14th Amendment to raise the debt ceiling unilaterally;

4) Obama caves to all Republican demands;

5) No raise and the U.S. goes into uncharted territory;

6) The coin.

Based on current and past moves, I suspect that 1 & 3 looks like the best bets to happen.

As a separate issue: I suspect that with the strengthening value of the US Dollar (Now worth $1.04 to the Euro) the Fed will have to increase long term interest rates before inflation kicks in. The US stocks are on a slow decline as we saw last week with a dead cat bounce on Thursday. Couple that with interest rates going up, we may see a 10-20% correction in the market over the next 2 months or so.

Some of you will just shrug however many folks 401K's are invested heavily in the market.

On another note: Has anybody seen the final GDP figure for Q4 2014 and all of 2014? I have seen estimates of +2.2 - 2.6% for Q4 however here we are March 14th and have not seen a final number. Have you?

[JohnyMac]

I have just read the final GDP number for Q4, 2014 2.2% and I have just seen the final number for Q1 2015, -.7%. Yes ladies and germs that is a negative .7% So our economy contracted in Q1 of this year.

https://bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

Has anybody heard about this or is it being reported in section C, page 33 of your local newspaper? 

The word on the street is that April & May retail numbers will not look rosey either. The big deflation of crude we all rejoiced in; most people took those saving's and paid off debt. Some smart folks used that saving's for the 3B's.

What are your thoughts for the economy in Q2 and Q3?  

[DMCakhunter]

JM,
There has been articles questioning the Feds own numbers and they admit their data is flawed.
http://www.cnbc.com/id/102715133
Fact is that with flawed data, you can't count on their numbers.
For what it is worth, till they get it sorted out, I will say that Q2 will be +.3 and Q3 will be +.7.

Edited Link - JMc

[JohnyMac]

So basically flat DMC...I agree.

On another note: I hate the "bad weather excuse." If I ever used bad weather other than a large weather event, e.g. Hurricane, earthquake, the Board would have crucified me. 

 

[DMCakhunter]

JM,
One of the bigger drags was the west coast port strikes. Truly hard to calculate the true impact. Then the california drought, then texas crop flooding. What is the next drag?

[JohnyMac]

All good points DMC. 

On another note: I am doing some business consulting with a small bar/restaurant in town here. The owners are running 39% over LY. They are also having the best year they have ever had.

IMO, some of the businesses failing across the country is just the result of poor business practices. When things were good, the poor business folks did OK; however when the economic SHTF they struggled and then went out of business or worst allowed the poor times to drain their life saving's.

If I had some VC money, I would go around and buy some of these poorly ran businesses. Get them back on their feet and flip 'em. There are a lot out there.
 

[brat]

I am doing some business consulting with a small bar/restaurant in town here. The owners are running 39% over LY. They are also having the best year they have ever had.

I ain't no economist, but the "red neck" evaluation of the situation screams " things are crappy, businesses are closing, I'm out of work........ let's get drunk and forgetta bout it".  Up 39% ! 

[JohnyMac]

  brat!

Just hedging my bets 

[Kbop]

time to make a still - redneck money. 

[Nemo]

Yeps, some good corn, watermelon or about any kind of fruit, squeeze it, a jug or 2 of water and some yeast, let it ferment, distill it and you got liquid gold.  Generally tastes good, but will kick you ass under the table about every time if you are not careful and keep a good look behind you so it don't sneak up on ya.

Nemo