October 17th (debt ceiling)

ancona said:

October 17th marks the end of the financial road. If the logjam in Congress cannot be broken by them, Jack Lew stated that there will be no more money at all. The extraordinary measures they have been using [pension cash, etc.] to fund .Gov will be gone and we will officially default. It will be interesting to see who blinks first.

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He tells The Daily Ticker the real story is the debt ceiling, and he thinks we’re “finally getting to a defining moment when the truth comes out…if we run out of debt ceiling, the president does have the power to prioritize the inflow of revenue which is still massive coming in.”

And the first thing the government will do, he says, is spend $30 billion paying the interest on the debt (according to Stockman, the government could also pay social security retirees, the armed services, and medicare reimbursements despite broaching the debt limit).

“It is a complete red herring to say there will be a default,” he tells us. “There will never will be a time in which there is not enough cash to pay the interest.”

This is contrary to rhetoric from Treasury Secretary Jack Lew, who has indicated to Congress prioritizing payments is just a default by another name.

Stockman argues tea party Republicans should use the debt ceiling to extract concessions from the White House including defunding Obamacare. The “federal budget is a doomsday machine,” says Stockman. And he insists that $2.5 trillion of spending is already mandatory or automatic entitlements that were never voted for by the people in congress today (implying this spending is unsustainable).
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The Wall Street Journal editorial page recently highlighted a largely unknown piece of legislation passed by the House of Representatives in May: the Full Faith and Credit Act, sponsored by Rep. Tom McClintock (R-CA). The bill would prevent the federal government from defaulting by mandating that the Treasury pay the nation's debts even after the debt ceiling is reached. There is enough federal revenue to cover those costs.

That means that some of the government's discretionary spending would not happen, effectively defunding and shutting down some government functions (perhaps in addition to those that are shut down already). But the U.S. government would not default. The Treasury actually has the discretion to structure payments in this way already, but without legislation mandating that it do so, there is no guarantee that it will.

During the 2011 debt ceiling fight, a few Republicans--some from the Tea Party, and even some moderates--suggested that the Treasury's public deadlines for a deal were illusory, because it could continue to service the nation's debt regardless. That is the basis for the spurious charge that the Tea Party, or the GOP itself, wanted default--a baseless claim hurled regularly by President Barack Obama and his Cabinet and party.

This time, the Republican leadership wants to ensure that default is not an option, or even a possibility. That is precisely why Senate Majority Leader Harry Reid (D-NV) has prevented the Senate version of the bill, sponsored by Sen. Pat Toomey (R-PA), from moving forward--and it is also why President Barack Obama has threatened to veto it if it passes. They--not the GOP--want to use threats of default as a bargaining tool.
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PMBug said:

Read this morning where GOP peeps are gaining confidence in their position that not increasing the debt limit won't bring financial armageddon:

http://www.usatoday.com/story/news/politics/2013/10/07/debt-limit-denial/2937087/

It occurred to me that there is growing evidence that the appetite for Treasuries among foreign investors has chilled[1, 2, 3]. They are increasingly not buying our debt (selling it actually) and this is not related to the current D.C. theater. The Fed, via QE, is the biggest (only?!?) buyer right now [4] and the market for Treasuries might implode if they made any serious effort to make good on their tapering rhetoric (which is why they can't). Realizing this, one could reasonably conclude that it might be a good idea to start reducing the amount of new Treasury bond issuances going forward. It might be the only way to escape the Fed's no win predicament with respect to QE and the dollar.

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Aubuy said:

Good thought, but where do you suppose gold is going to end up fitting in this puzzle?

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