Thursday, January 3, 2013
Debt Ceiling Hit
Well, Sec. Geithner wasn't lying, as of Monday's close we are at the ceiling. Nearly $100B of net new Treasury securities issuance on Monday topped things off.
See Table III-C here at the DTS.
If nothing else, the next 60 days should be revealing in that based on the press reports of the political situation (fiscal morons running amok, etc...) there will be no issuance of $NFA over this period. Let's see how things economic fare over this time.
The last time we did this was in 2011 when we hit the ceiling in mid-May and didn't get the ceiling raised until the first week in August, a bit over 2 months of operation in this mode. That year, GDP growth in the April/May/June quarter came in at 0.1% and then recovered in the July/August/Sept quarter and came in at 2.5%.
Let's watch this and perhaps learn something at least.
Observations on the December 2012 month end numbers in the DTS: We ran a small surplus of about 20B last month on total withdrawals of 947B minus 651B of UST redemptions and 991B of total deposits minus 674B of UST issuance. The cash account was left with 92B which is what Treasury probably will need to handle large net redemption days that can approach (perhaps sometimes even exceed) this number.
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7 comments:
SNFA?
some form of Net Financial Assets?
Dan,
$NFA which we have been using to designate "USD Net Financial Assets"
from regular "Financial Assets" (stocks/bonds/etc) that can be measured in USDs...
rsp,
"there will be no issuance of $NFA over this period."
The Treasury can do transactions such as sale of assets which does increase the net financial assets of the other two sectors.
So there is $200bn of headroom according to Geithner.
http://www.treasury.gov/connect/blog/Documents/Sec%20Geithner%20LETTER%2012-26-2012%20Debt%20Limit.pdf
BREAKING: Geithner said to plan departure before debt ceiling reckoning - BBG.
Ram,
that means "the new guy" will be starting from scratch.... not having learned the lessons that Geithner learned back in 2011...
What if a "debt scold" is nominated?????
That moron might not be very motivated to push congress for resolution until it is too late and he will have to learn "the hard way"... rsp,
Matt,
For some reason I think the policy makers want markets to tank and engineer a recession. Remember the recent Greenspan comment on the cliff a month or so back - where he said recession is the price we need to pay and is worth it?
It is different from the incorrect notion that "surpluses create growth" in which they are clueless about the result of their actions. Now they are slowly starting to be explicit about it.
Ram,
Greenspan has said some incoherent things over the years.... remember he was an Ayn Rand desciple and actual gold bug way back in the 80s before Reagan put him at the Fed...
A lot of the political right-libertarians over here (and I would put Greenspan in that bucket) look at recessions as "cleansing"... or some sort of deranged "pennance" that has to be paid in return for the "good times"... there is deep psychopathy going on here with these people...
So I try to keep it simple (Ockhams Razor) and I assume they are all morons that have very limited ability for mathematical abstraction... they just cant see how these FFNC systems are supposed to operate and they are stuck in gold standard type thinking and/or household analogy ... most are in this belief unfortunately...
But lets see how this goes for the next 60 days, I doubt bank credit or exports are going to accommodate the govts fiscal policy over this time and liquidations are sure to start soon .... probably both bonds and stocks will be liquidated...
This is like a "laboratory" over the next 60 days here in the US for me...
rsp,
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