Thoughts From Joe - October 4, 2013October 04, 2013 Posted by: Joe Morgan
On or around October 17th, the Treasury will "run out of money" and people are concerned about default. The Treasury receives about $150 billion per month in revenue and interest on Treasury bonds is just $30 billion. Raising the debt ceiling only allows the Treasury to issue additional debt - they can roll over existing debt without any Congressional approval. Treasury Secretary Jack Lew is declining to speak about prioritization of payments because that would negate the Democrats' threat of potential default. But at a 5-to-1 coverage ratio and considering that interest payments should clearly be the number one priority, the only way we get a default is if the Treasury chooses this to be the case. That would be political suicide for the entire Democratic party. Companies have warned about their forthcoming earnings at the second highest rate since 2001 with negative outlooks outnumbering positives by 5.2-to-1. The highest warning ratio of 6.3-to-1 occurred last quarter. It seems companies have wrung nearly all of the potential efficiencies for now. If, however, future growth is significant, we could see a pickup in hiring.
Former Prime Minister Silvio...Read More