The Beginning of the End for Washington

Step back. Try for a moment to extrapolate what a government shutdown and discredited U.S. currency could do to the economy and the public's faith in government. Think beyond next year's congressional elections or even the 2016 presidential race. Factor in existing demographic and social trends. I did, and this is what I concluded:
1. The Republican Party is marginalizing itself to the brink of extinction.
2. President Obama can't capitulate to GOP demands to unwind the fairly legislated and litigated Affordable Care Act. To do so would be political malpractice and a poor precedent for future presidents.
3. Despite the prior two points, Obama and his party won't escape voters' wrath. Democrats are less at fault but not blameless.
4. This may be the beginning of the end of Washington as we know it. A rising generation of pragmatic, non-ideological voters is appalled by the dysfunctional leadership of their parents and grandparents. History may consider October 2013 their breaking point. There will come a time when Millennials aren't just mad as hell; they won't take it anymore.

http://www.nationaljournal.com/politics/the-beginning-of-the-end-for-washington-20131001 

4 week tbill surge

A look at the stocks surge today and one would get the impression that not only should the government shutdown be permanent (closing the Fed would have a vastly different result on the S&P), but that the debt ceiling is completely irrelevant and immaterial for risk assets. One would get a far different impression by looking at today's just concluded 4-Week Bill [8] auction. Today's outlier rate on the just priced $35 billion in 4-week bills can be seen quite dramatically on the chart below, and is evidence that someone (or someones) is getting quite nervous ahead of the events in the next few weeks.
[9]
What is going on here and why the spike? Recall what we said a week ago in "Here Is How To Trade The Debt Ceiling Showdown [10]."

... there is a simple pair trade for those who would like to position for a contentious debt ceiling fight with an ETA mid-October and skip the bipolar and HFT-dominated equity markets. Recall that in the summer of 2011 when the last big debt ceiling debacle loomed and resulted in a last minute outcome that also led to the downgrade of the US by a rating agency that has since sold out, rates of bills due just before the debt ceiling D-Date soared, while those sufficiently after the ceiling interval tightened. Well, the same trade is just as applicable this time.

Sell October 31 Bills versus 12 Month Bills

Supply dynamics and potential market concerns around a debt ceiling stand-off in Washington should push the 1M1Y bill curve flatter... The October 31 bills are likely the most vulnerable, and should cheapen significantly versus 12 month bills in a protracted fight.

One-month and three month bills are already trading close to zero, having briefly traded negative last week. With bill supply to remain flat heading into the end of October, suggesting that supply should keep bills yields across the curve under pressure. With bill yields largely beholden to supply dynamics, the greatest scope for further compression is in year bills, which are currently trading around 10bp. Given historical relationship between bills yields and bills outstanding, year bills are roughly 3bp rich to supply-implied fair value, while 3-month bills are about 3.5bp rich.

This trade may be difficult to put on in size until after quarter end due to dealers balance sheet constraints. But as noted above, we believe that the market will not begin to fully price the risk to front end bills until about two weeks before the end date. We expect the opportunity to remain available at for the first week of October.

Sure enough, today is the first day of the next quarter (window dressing is over), and the bond market, if not so much the stock market, has finally awakened that the government shutdown is merely an indication of just how contenuous the debt ceiling negotiation very likely ill be, and that it is increasingly likely that the X-Date of October 18 [11]may come and go without a deal, which just may result in a technical default on the nearest maturity Bills.
End result: today's auction was an absolute abortion and absent some deus ex machina agreement between the GOP and Democrats, one can expect the October 31 bills (and others just around them) to continue blowing wider as quietly but confidently those holding the most at risk paper exit stage left.
But that's not all. We also noted the following:

The last go-round, the 1m1y curve flattened to 3bp. Though the curve is just 6bp away from that right now, it is beginning from a starting point that is 10bp flatter than one month prior to the 2011 debt ceiling. The securities that the market viewed as “at risk” traded with yields above year bills, hence our recommendation to sell the October 31 issue rather than the current one month bills.

[12]

We think that the curve has scope to flatten to zero, if not further, depending on how close to the wire negotiations come.

As of moments ago, the curve has gone beyond flat and into "further" as the 1M1Y just went negative.
[13]

http://www.zerohedge.com/print/479629

U.S. Government Shutdown - CFTC DSIO Contacts

U.S. Government Shutdown - CFTC DSIO Contacts

Due to the U.S. government shutdown, the CFTC has asked NFA to send this information to our Members from Gary Barnett - CFTC Director, Division of Swap Dealer and Intermediary Oversight:

As you know, the U.S. government has shut down due to a lack of Congressional appropriations. The CFTC, as well as a number of other agencies, have accordingly been shut down.

Under authority provided in the law, there are a limited number of personnel that have been "excepted" and, as such, are permitted to work to help protect life and public property. These personnel are available to respond to emergency situations, and should be contacted if the need arises. Please note that they are not authorized to respond to normal operating activities.

In the event your firm has any circumstances arise where you need to contact the CFTC for reasons other than normal operating activities, for the Division of Swap Dealer and Intermediary Oversight, please contact the individuals listed below.

Name	Title	Work	Cell	Email
Gary Barnett	Director	202-418-5977	202-413-6181	gbarnett@cftc.gov
Kevin Piccoli	Deputy Director, Examinations	646-746-9834	201-888-4936	kpiccoli@cftc.gov
Erik Remmler	Deputy Director, Registration and Compliance	202-418-7630	202-725-3381	eremmler@cftc.gov
Tom Smith	Deputy Director, Capital and Margin	202-418-5495		tsmith@cftc.gov

---

You are receiving this message because you are either a Member of National Futures Association (NFA) or you subscribed to the email subscription list on NFA's website. If you are a subscriber, you can cancel or change your subscription at any time, visit the Email Subscriptions page on our website at http://www.nfa.futures.org/news/subscribe.asp.

US government shutdown: Barack Obama is presiding over the end of America's superpower status

For a country that is supposed to be the most powerful in the world, the fact that Americans have today woken up  to find large swathes of their nation closed for business is humiliating.

• Reaction to shutdowns is overdone, but the Republicans will suffer
• Barack Obama is likely to come out on top
• 10 things affected by the US shutdown
• Dollar falls but markets steady on US shutdown

Thanks to President Barack Obama obduracy over his flagship healthcare policy, Democrats and Republicans have failed to reach agreement in Congress on the federal budget, forcing the US Government to close down for the first time in 17 years, with around 700,000 federal workers being placed on indefinite leave.
While the White House insists that essential areas of the government, such as the military, will continue to function, the shut down represents yet a further blow to the prestige of the Obama administration at a time when it is still reeling from its inept handling of the recent Syrian crisis.
There was a time not so long ago when the world looked to America for both political and economic leadership. But now that can no longer be taken for granted thanks to Mr Obama's inability to provide decisive leadership on either front.
Republicans rightly argue that by pressing ahead with Obamacare before the implications of the programme have been properly assessed risks adding to America's debt mountain at a time when the American economy is still recovering from the biggest economic crisis in recent history.
The emergence of Russia, meanwhile, as the main power broker in the Syria crisis has severely damaged America's standing as a major global player.
In short, the longer the Obama presidency continues, the more America's status as a superpower ebbs away.

http://blogs.telegraph.co.uk/news/concoughlin/100238900/us-government-shutdown-barack-obama-is-presiding-over-the-end-of-americas-superpower-status/

US shutdown: a guide for non-Americans

Please explain what just happened

The US government has begun shutting its non-essential services. Hundreds of thousands of workers are waking up to the news that they are on unpaid leave, and they don't know how long it will last. The shutdown, triggered at midnight Washington time, will bring a range of services to a standstill across the world's largest economy.

Why?

The Federal government had no choice. The US financial year ended on 30 September, and politicians on Capitol Hill have failed to agree a new budget for the 2013-2014 financial year. Even a 'stopgap' funding deal proved beyond them. Without a budget deal approved by both parts of Congress, the House of Representative and the Senate, there's no legal agreement to pay non-essential staff.

Weren't they supposed to fix this last night?

They tried. A series of proposals rattled between the two sides on Monday night until midnight struck without a deal.

Why couldn't they agree a deal?

Under the US constitution, the president cannot unilaterally bring in legislation. And despite weeks of talks, Republicans continue to include cuts and delays to Barack Obama's Affordable Care Act in the budget legislation they sent up to the Senate.
The House of Representatives is controlled by the Republican Party, whose Tea Party movement remain deeply opposed to Obamacare. They tried to use the budget as leverage to crowbar changes to the Act. The Senate, which is under the control of Obama's Democrats, has stood firm.

Will the shutdown mean the entire US government grinds to a halt?

No, it's not an anarchist's (or libertarian's?) dream. Essential services, such as social security and Medicare payments, will continue.
The US military service will keep operating, and Obama signed emergency legislation on Monday night to keep paying staff. But hundreds of thousands of workers at non-essential services, from Pentagon employees to rangers in national parks, will be told to take an unpaid holiday.

So what happens how?

US politicians are meeting again in Washington on Tuesday. Before Monday's session broke up, the lower house proposed a 'bipartisan committee' to consider a way forward. The Senate is expected to reject this proposal, sticking to its position that Obamacare cannot be unravelled. Federal staff will remain unpaid until a budget is agreed. A 'stopgap' funding plan is an option, but Obama appeared wary of that option, arguing that would simply guarantee a repeated fight in a few weeks' time.

How much damage will it cause?

If people aren't getting paid, they won't spend as much in the shops. They may be unable to meet essential financial commitments, such as mortgages and credit card payments.
Analysts at IHS Global Insight have calculated that it will knock $300m a day off US economic output (total US nominal GDP, or output, was around $16 trillion last year).
The key issue is how long it lasts. Moody's Analytics reckons that a two-week shutdown would cut 0.3% off US GDP, while a month-long outage would knock a whole 1.4% off growth.

When did this last happen?

It's the first shutdown since 1995-1996, when Bill Clinton and the House of Representatives (and its speaker, Newt Gingrich) also failed to agree on a budget to fund federal services. That row ran for 28 days (over two stages).
But it was a more regular event in the 1980s, usually for a few days at a time. In total, the US government has partially shut down on 17 occasions before today.

Why doesn't it happen in other countries?

The shutdown situation is a product of the US democratic system. The president is both head of state and head of the federal government, without a guaranteed majority in either of the legislative bodies where new laws are debated and voted upon (because presidents, congressmen and women and senators are elected separately). The president can't simply ram laws through Capitol Hill.
In Britain, for example, tax and spending policies are outlined in the budget, presented to parliament by the chancellor of the exchequer. These changes are brought into law in a finance bill in the House of Commons. That's in effect a confidence vote in the government, and even the most fractious backbench MP would balk at rebelling on it.
Finance bills are also one area where the elected House of Commons has the upper hand over the unelected House of Lords. The Lords have no power to reject a money bill; they can only delay it for a month.

How does the US shutdown row tie in with the debt ceiling battle?

They are separate issues, but the shutdown is raising fears over the debt ceiling.
America has a legal limit on its borrowing of $16.7tn dollars, and it's likely to hit that point in mid-October.
If a deal isn't reached, then America would run out of borrowing room, meaning the world's biggest economy would default on its debts. Both problems need solving – and a shutdown is now eating into valuable time to fix the debt ceiling.

Why can't they just raise the debt ceiling?

Again, legislation is needed. Republicans are again trying to link the plan to Obamacare – arguing that the healthcare reforms are unaffordable.

How are the markets reacting?

So far, there's no panic. Investors are calculating that the shutdown will be short. But prepare for nervousness as that debt ceiling deadline gets closer.
The dollar, though, is being hit – dropping half a cent against major currencies.
This article originally confused the two Houses of Congress. Now corrected. Apologies. Thanks to readers who flagged up. GW.

http://www.theguardian.com/world/2013/sep/30/us-shutdown-explainer-non-americans

US government shut down

It's 12:01am, do you know where your government is?

• *WHITE HOUSE BUDGET OFFICE DIRECTS AGENCIES TO BEGIN SHUTDOWN
• *U.S. GOVERNMENT SHUTS DOWN FOR FIRST TIME IN 17 YEARS

S&P Futures are 1677, 10Y yield 2.65%, WTI $101.96, Gold $1329.00 - let's see where we open tomorrow...

[3]

[4]

Full Statement from The White House [4]:

MEMORANDUM FOR THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES

FROM: Sylvia M. Burwell, Director

SUBJECT: Update on Status of Operations

This memorandum follows the September 17,2013, Memorandum M-13-22, and provides an update on the potential lapse of appropriations.

Appropriations provided under the Consolidated and Further Continuing Appropriations Act, 2013 (P.L. 113-6) expire at 11:59 pm tonight. Unfortunately, we do not have a clear indication that Congress will act in time for the President to sign a Continuing Resolution before the end of the day tomorrow, October 1, 2013.

Therefore, agencies should now execute plans for an orderly shutdown due to the absence of appropriations. We urge Congress to act quickly to pass a Continuing Resolution to provide a short-term bridge that ensures sufficient time to pass a budget for the remainder of the fiscal year, and to restore the operation of critical public services and programs that will be impacted by a lapse in appropriations.

Agencies should continue to closely monitor developments, and OMB will provide further guidance as appropriate. We greatly appreciate your cooperation and the work you and your agencies do on behalf of the American people.

Now it's getting serious...

http://www.zerohedge.com/print/479603

Half Of US Population Accounts For Only 2.9% Of Healthcare Spending; 1% Responsible For 21.4% Of Expenditures

With the topic of peak class polarization once again permeating the airwaves and clogging up NSA servers, and terms like 1% this or that being thrown around for political punchlines and other talking points, one aspect where social inequality has gotten less prominence, yet where the spread between the "1%" and everyone else is perhaps most substantial is in realm of healthcare spending: perhaps the biggest threat to the long-term sustainability of the US debt picture and economy in general. The numbers are stunning.
According to the latest data compiled by the Agency for Healthcare Research and Quality, in 2010, just 1% of the population accounted for a whopping 21.4% of total health care expenditures with an annual mean expenditure of $87,570. Just below them, 5% of the population accounted for nearly 50% of all healthcare spending. Just as stunning is the "other" side: the lower 50 percent of the population ranked by their expenditures accounted for only 2.8% of the total for 2009 and 2010 respectively. Perhaps in addition to bashing the "1%" of wealth holders, a relatively straightforward and justified exercise in the current political climate, it is time for public attention to also turn to the chronic 1% (and 5%)-ers who are the primary issue when it comes to the debt-funding needed to preserve the US welfare state.
The spending distribution in chart format:

Broken down by age - While the elderly represented 13.3 percent of the overall population, they represented 47.9 percent of those individuals who remained in the top decile of spenders:

Broken down by sex - While women represented 50.9 percent of the overall population, they represented 61.6 percent of those individuals who remained in the top decile of spenders:

Broken down by race and ethnicity - Individuals identified as Hispanic and black non-Hispanic single race were disproportionately represented among the population that remained in the lower half of the distribution based on health care spending:

More of the report's findings:

• In 2009, 1 percent of the population accounted for 21.8 percent of total health care expenditures and 20.5 percent of the population in the top 1 percent retained this ranking in 2009. The bottom half of the expenditure distribution accounted for 2.9 percent of spending in 2009; about three out of four individuals in the bottom 50 percent retained this ranking in 2010.
• Those who were in the top decile of spenders in both 2009 and 2010 differed by age, race/ethnicity, sex, health status, and insurance coverage (for those under 65) from those who were in the lower half in both years.
• Those in bottom half of health care spenders were more likely to report excellent health status, while those in the top decile of spenders were more likely to be in fair or poor health relative to the overall population.
• While 15 percent of persons under age 65 were uninsured for all of 2010, the full year uninsured comprised 26.1 percent of those in the bottom half of spenders for both 2009 and 2010. Only 3.4 percent of those under age 65 who remained in the top decile of spenders in both years were uninsured for all of 2010.
• Relative to the overall population, those who remained in the top decile of spenders were more likely to be in fair or poor health, elderly, female, non-Hispanic whites and those with public only coverage. Those who remained in the bottom half of spenders were more likely to be in excellent health, children and young adults, men, Hispanics, and the uninsured.

And the full report.
In 2009, 1 percent of the population accounted for 21.8 percent of total health care expenditures, and in 2010, the top 1 percent accounted for 21.4 percent of total expenditures with an annual mean expenditure of $87,570. The lower 50 percent of the population ranked by their expenditures accounted for only 2.9 percent and 2.8 percent of the total for 2009 and 2010 respectively. Of those individuals ranked at the top 1 percent of the health care expenditure distribution in 2009 (with a mean expenditure of $90,061), 20.5 percent maintained this ranking with respect to their 2010 health care expenditures.
In both 2009 and 2010, the top 5 percent of the population accounted for nearly 50 percent of health care expenditures. Among those individuals ranked in the top 5 percent of the health care expenditure distribution in 2009 (with a mean expenditure of $40,682), approximately 34 percent retained this ranking with respect to their 2010 health care expenditures. Similarly, the top 10 percent of the population accounted for 65.2 percent of overall health care expenditures in 2009 (with a mean expenditure of $26,767), and 39.7 percent of this subgroup retained this top decile ranking with respect to their 2010 health care expenditures. The data also indicate that a small percentage of the individuals in the top percentiles in 2009 and 2010 had expenditures for only one year because they died, were institutionalized, or were otherwise ineligible for the survey in the subsequent year.
In both 2009 and 2010, the top 30 percent of the population accounted for nearly 90 percent of health care expenditures. Among those individuals ranked in the top 30 percent of the health care expenditure distribution in 2009, 62.6 percent retained this ranking with respect to their 2010 health care expenditures (figure 1). Furthermore, individuals ranked in the top half of the health care expenditure distribution in 2009 accounted for 97 percent of all health care expenditures. Among this population subgroup, 74.9 percent maintained this ranking in 2010. Alternatively, individuals ranked in the bottom half of the health care expenditure distribution accounted for only 2.9 percent of medical expenditures (with a mean expenditure of $236 in 2009). Similar to the experience of the top half of the population based on their medical expenditure rankings, 73.9 percent of those in the lower half of the expenditure distribution retained this classification in 2010.
Given the high concentration of medical expenditures incurred by the top decile of the population ranked by health care spending (65.2 percent), identifying the characteristics of those individuals exhibiting significant reductions in health care spending in a subsequent year is also of interest. Among those ranked in the top decile in 2009 based on their high level of medical expenditures, 29 percent shifted to a ranking in the lower 75 percent of the expenditure distribution in 2010 (data not shown). Individuals ranked in the lower 75 percent of health care spending accounted for only 13.6 percent of all medical expenditures in 2010.
Individuals who were between the ages of 45 and 64 and the elderly (65 and older) were disproportionately represented among the population that remained in the top decile of spenders for both 2009 and 2010. While the elderly represented 13.3 percent of the overall population, they represented 47.9 percent of those individuals who remained in the top decile of spenders. For those individuals who remained in the lower half of the distribution based on health care expenditures over the two-year span, the elderly represented only 3.1 percent of the population. Alternatively, children (0-17) and young adults (18-29) were disproportionately represented among the population that remained in the bottom half of spenders (32.4 percent and 23.5 percent, respectively). In contrast, children and young adults represented only 2.1 percent and 2.9 percent, respectively, of those individuals who remained in the top decile of spenders. Individuals in the top decile ordered by medical expenditures in 2009 that shifted below the first quartile in 2010 were predominantly between the ages of 30 and 64.
Individuals identified as Hispanic and black non-Hispanic single race were disproportionately represented among the population that remained in the lower half of the distribution based on health care spending. While Hispanics represented 16.3 percent of the overall population in 2010, they represented 24.8 percent of those individuals who remained in the bottom 50 percent of spenders (figure 3). For those individuals who remained in the top decile of spenders, Hispanics represented only 6.0 percent of the population. Individuals in the top decile ordered by medical expenditures in 2009 that shifted below the first quartile in 2010 were more likely to be non-Hispanic whites and other races (74.9 percent) relative to their representation in the overall population (66.6 percent).
Individuals who remained in the top decile of spenders in 2009 and 2010 also differed significantly by sex, compared with those who remained in the lower half of the distribution ranked by medical care expenditures. While women represented 50.9 percent of the overall population, they represented 61.6 percent of those individuals who remained in the top decile of spenders (figure 4). For those individuals who remained in the lower half of the distribution based on health care expenditures over the two-year span, women represented only 43.3 percent of the population. Alternatively, men were disproportionately represented among the population that remained in the bottom half of spenders (56.7 percent). In contrast, men represented only 38.4 percent of those individuals who remained in the top decile of spenders. Individuals in the top decile ordered by medical expenditures in 2009 that shifted below the first quartile in 2010 were predominantly female (58.3 percent).
Health status was a particularly salient factor that distinguished those individuals who remained in the top decile of spenders. Overall, 2.8 percent of the population was reported to be in poor health in 2010, and another 7.8 percent was classified in fair health (figure 5). In contrast, of those individuals who remained in the top decile of spenders, 20.2 percent were in poor health and another 26.7 percent were in fair health. Furthermore, for those individuals remaining in the bottom half of spenders, only 0.5 percent were reported to be in poor health and 4.1 percent in fair health. Individuals in excellent health were disproportionately represented among those who remained in the lower half of spenders both years (41.2 percent). Alternatively, for those individuals remaining in the top decile of spenders, only 5.2 percent were reported to be in excellent health and 14.5 percent in very good health. Individuals in the top decile ordered by medical expenditures in 2009 that shifted below the top quartile in 2010 were predominantly in excellent, very good, or good health (25.8, 34.8, and 23.2 percent, respectively).
Focusing on the under age 65 population, health insurance coverage status also distinguished individuals who remained in the top decile of spenders from their counterparts in the lower half of the distribution. Individuals who were uninsured for all of calendar year 2010 were disproportionately represented among the population that remained in the lower half of the distribution based on health care spending. While 15 percent of the overall population under age 65 was uninsured for all of 2010, the full year uninsured comprised 26.1 percent of all individuals remaining in the bottom half of spenders (figure 6). Alternatively, only 3.4 percent of those under age 65 who remained in the top decile of spenders were uninsured. In addition, while 17.9 percent of the overall population under age 65 had public-only coverage for all of 2009, 32.6 percent of those who remained in the top decile of spenders had public-only coverage.
With respect to poverty status classifications, 36.2 percent of the overall population resided in families or single-person households with high incomes in 2010 (figure 7) and 15.2 percent had incomes at or below the poverty threshold. A lower representation of high income individuals (26.6 percent) and a higher representation of the poor (19.3 percent) were observed among those who remained in the lower half of spenders in both 2009 to 2010.
Source: The Concentration and Persistence in the Level of Health Expenditures over Time: Estimates for the U.S. Population, 2009-2010


http://www.zerohedge.com/news/2013-09-30/half-us-population-only-accounts-29-healthcare-spending-1-responsible-214-all-expend

Republicans’ Shutdown Fight Exposes Simmering Civil War

 By Heidi Przybyla and Julie Hirschfeld Davis - Sep 30, 2013

The Republican war with President Barack Obama over funding the government and the new health-care law will play out in the coming days and months. The conflict now exposed within the party may shape its future for years.
An intraparty tug-of-war, largely confined to campaign primaries during the past three years, is exposed on the national stage as Republicans challenge each other on tactics as a government shutdown looms, coming as early as tomorrow.
“The circus created the past few days isn’t reflective of mainstream Republicans -- it projects an image of not being reasonable. The vast majority of Republicans are pretty level-headed and are here to govern,” said Representative Michael Grimm, a New York Republican.
“This is a moment in history for our party to, once and for all, put everything on the table. But at some point we’re going to come together and unify,” Grimm said, adding that the “far-right faction” of the party “represents 15 percent of the country, but they’re trying to control the entire debate.”
It’s a civil war that has beset the party before, as base activists grow impatient with established leaders they claim have grown complacent in the anti-government fight. The results can be unpredictable, perhaps more so this time given that it’s taking place 13 months before the next election.

Goldwater ’64

The rise of Barry Goldwater in 1964 as the Republican presidential nominee ended in the landslide election of Democratic President Lyndon Johnson. The revolt led by Newt Gingrich, then a Georgia congressman, culminated in the 1994 Republican House takeover after 40 years in the minority.
Gingrich, who became the House speaker, and his majority prompted the 1995-96 partial government shutdowns, which dimmed the party’s approval ratings and fueled the re-election of President Bill Clinton.
“This is a battle that has been under way slowly since 2010 and is now coming to a head,” said David Redlawsk, a political science professor at Rutgers University in New Brunswick, New Jersey. “This is part of a bigger question about what that party is going to be. That may have major repercussions in another year.”
The fight in Congress today is between members who want to avoid that fate of Gingrich’s majority and those convinced conditions have changed to their advantage.

Health Law

“I’ve been elected to fight for the people back home, wherever that takes us,” said Representative Mark Meadows, a North Carolina Republican. “We’re united in our efforts to do all we can to avert a shutdown. We’re trying to offer a compromise.” Meadows said health-care law “is not ready for prime time.”
Concern about the potential impact of the federal closure sent stocks lower in Asian trading. The MSCI Asia Pacific Index lost 1.4 percent as of 3 p.m. Tokyo time, and Standard & Poor’s 500 Index futures sank 0.8 percent. U.S. government securities rallied, with yields on benchmark 10-year notes slipping to 2.60 percent, from 2.625 percent late last week.
The tactics of a group of Republicans are causing angst among some established party leaders and fundraisers who worry that the infighting is obscuring what could otherwise be a winning political moment.

Fundraiser’s Concern

“I fully understand where the Tea Party and like-minded people are coming from, that Obamacare is a tragically flawed law and it’s not good for the country, but I would also have to add that shutting down the government is not a good for the country,” said Fred Malek, a Republican fundraiser.
“At a time politically where Obama is in a very weak position resulting from his handling of the situation in Syria, the economic situation, and the implementation of a health-care law that is going to be really rocky, we’re basically going in and seizing defeat from the jaws of victory politically,” he said. “You’ve got a flawed law that’s bad for the country being met with a flawed approach that is also very bad for the country, and I don’t think it’s good politically or substantively.”
Sal Russo, chief strategist of the Sacramento, California-based Tea Party Express, a political action committee that advocates smaller government, said the episode in Washington is pleasing to movement activists.
“There was a lot of frustration that Republicans weren’t doing anything,” he said. “This is going to encourage them to do more.”

Intransigence Tag

It’s unfair to place all of the blame for the fight at the feet of Republicans who come of the party’s Tea Party wing, Russo said. If Obama and Senate Majority Leader Harry Reid “look intransigent, they will be the losers,” he said. “There is plenty of room for compromise, but the Democrats and the president have shown no willingness to compromise.”
Russo said Tea Party Republicans will also want a fight over the nation’s borrowing limit, which the Treasury says will be exhausted no later than Oct. 17. If Congress doesn’t lift the cap, the nation will default on its debts.
“The American public understands you have to pay the bills you run up,” he said. “I also think it is worthy of a fight and I think there is going to be one.”
The congressional fight is providing new energy to the movement, Russo said. “People are fired up that some people are willing to stand up,” he said.

Strategist Outrage

Several Republican strategists have privately expressed outrage in recent weeks at the lengths to which some of their own party’s activists are willing to go to stoke shutdown fervor, complaining that they are spending more time and money targeting their party colleagues while giving Democrats a pass. The Republicans requested anonymity because they didn’t want to publicly disparage party allies.
Among the targets of their complaints are the Heritage Foundation, helmed by former Republican Senator Jim DeMint of South Carolina, which has been leaning on Republicans to tie keeping the government open to defunding the health-care law, and the Senate Conservatives Fund, a political action committee DeMint founded that backs Republican primary candidates.
The fund released a television advertisement Sept. 5 saying Senate Minority Leader Mitch McConnell of Kentucky is “refusing to lead on defunding Obamacare,” and last week accused him and Republican Senator John Cornyn of Texas, the No. 2 leader, of “the ultimate betrayal” for allowing a government-funding bill to go forward.

Radio Ads

It’s also running radio ads against Republican senators in a handful of states pressuring them to oppose funding the health-care law. While the group has yet to endorse any Senate Republican primary candidates, both McConnell and Cornyn are facing re-election next year, and the Kentuckian has drawn a Tea Party-backed Republican rival, businessman Matt Bevin.
Avoiding such primary challenges is driving much of the strife, said Dan Schnur, the Jesse M. Unruh Institute of Politics director at the University of Southern California, in Los Angeles.
“There are 30 or 40 House rebels who all know there is no way they could ever lose a general-election campaign, no matter how hard they tried, and the only way they don’t get to stay in Congress is if they face a more conservative primary challenger,” Schnur, an aide in Republican Senator John McCain’s 2000 presidential campaign, said in an interview.
Of the 232 Republicans in the House, 215 represent districts that voted for Republican nominee Mitt Romney over Obama. The midterm election is likely to be more pro-Republican than the 2012 election, when Obama’s national campaign was driving turnout. That creates few political incentives for compromise, as most of their districts were anti-Obama in 2012 and probably will be again in 2014.

High Stakes

House Speaker John Boehner of Ohio has less pressure to exert on members than outside groups urging confrontation, Schnur added. “Boehner can take away a committee assignment -- these groups can take away their jobs,” Schnur said.
Keith Appell, a consultant whose clients include Tea Party-aligned groups, said “if they cave again they’re looking at multiple primaries in the spring and their base sitting home in the fall, in a base election. Caving is not an option.”
Representative Trent Franks, an Arizona Republican, said he’s frustrated that his party can’t advocate vigorously without being accused of “wanting to eviscerate and destroy all of government.” Still, the political risks prompted him to initially back a different strategy for fighting the health-care law and funding the government.
“Harry Reid will do everything he possibly can to precipitate a shutdown because, no matter what happens, Republicans will be blamed,” he said of the Senate majority leader, a Nevada Democrat. “Unfortunately, I think that’s partly of our own doing. We’ve allowed the Democrats to chase us with a government shutdown much like a little boy on the playground chases a little girl with a spider.”
To contact the reporters on this story: Heidi Przybyla in Washington at hprzybyla@bloomberg.net; Julie Hirschfeld Davis in Washington at jdavis159@bloomberg.net
To contact the editor responsible for this story: Jeanne Cummings at jcummings21@bloomberg.net

http://www.bloomberg.com/news/print/2013-09-30/republicans-shutdown-fight-exposes-simmering-civil-war.html

Dallas County Now Has Its Very Own Bulletproof, "Mine-Protected" Military SUV

Now that the war in Iraq is officially over and the one in Afghanistan winding down, the Department of Defense found itself facing a conundrum. It had just spent billions of dollars buying heavily armored personnel carriers designed to stand up to insurgent attacks only to find that it had run out of wars to use them in.
The initial plan was to shove the vehicles, called MRAPS (Mine-Resistant Ambush Protected) into a warehouse and let them collect dust. That changed when someone decided that, having served so admirably overseas, it would be only just to bring the MRAPs stateside and deploy them in the domestic war on crime.
And so, for the past couple of months, news reports have been popping up announcing that places like Murfreesboro, Tennessee and Ohio State University have been receiving their very own military-grade armored SUVs.
See also: District Attorney Craig Watkins' Epic Quest to Use a Former Drug Dealer's Porsche Boxter

http://blogs.dallasobserver.com/unfairpark/2013/09/dallas_county_now_has_its_very.php

Credit Markets Signal Bigger Fear Of Treasury Default Than In 2011

Earlier in the week we noted the spike [5] in the cost of protecting against a technical default on US Treasuries. While well below "record" wides of 2011, a very interesting event has occurred. The cost of 1Y protection has surged higher than the 5Y protection - something we have only seen in the summer of 2011. However, this time it's different as the inversion is even greater than in 2011 - although not the most liquid instrument in the world - implying a greater chance (albeit a small probability) of a postponed payment in US Treasuries. As we noted previously, there is a way to trade this away from CDS-land [5].

USA CDS curve inverted more than in 2011...
[6]

And the 1m1y Treasury bills flattener is working in our direction [5]...
[7]
Charts: Bloomberg

http://www.zerohedge.com/print/479502

Which countries have nuclear weapons?

As the United Nations discusses the prevention of nuclear proliferation, we look at which countries have nuclear weapons and how were they developed.

http://www.bbc.co.uk/news/world-24277021

US braces for possible government shutdown

The US government is bracing for a possible shutdown, as Republicans and Democrats in Congress remain deadlocked on a budget to continue its funding.

Agencies have begun making contingency plans ahead of the 1 October deadline to pass a new funding resolution.
The Senate has passed a bill to fund the government through 15 November.
But House Republicans have said they refuse to approve the bill absent a provision to strip funding from President Barack Obama's health law.
The Senate is controlled by Mr Obama's Democratic party, while the Republicans hold the majority in the House of Representatives.
As a result, lawmakers are at a stalemate as the deadline approaches.
Government agencies have been selecting workers considered essential should funds stop flowing.
Obama exhorts conservatives The looming shutdown is one of two fiscal crises facing the US government. On 17 October, the US treasury department's authority to borrow money to fund its debt obligations expires unless Congress approves a rise in the so-called debt ceiling.
On Friday afternoon, President Barack Obama urged House Republicans to pass the Senate's stopgap budget bill and to extend the debt limit, and demanded they not threaten to "burn the house down because you haven't gotten 100% of your way".
Mr Obama said if the nation were to default on its debt, it would have a "profound destabilising effect" on the world economy.
"Voting for the treasury to pay its bills is not a concession to me," he said. "No-one gets to hurt our economy... just because there are a couple of laws [they] don't like."
He described the healthcare law as "a done deal" and said the Republican-backed repeal effort was "not going to happen".
Mr Obama said the Senate had "acted responsibly" in passing the budget measure and that now it was up to Republicans in the House of Representatives "to do the same".
Civilian cuts

If the government does shut down on 1 October, as many as a third of its 2.1 million employees are expected to stop work - with no guarantee of back pay once the deadlock is resolved.

National parks and the Smithsonian museums in the nation's capital would close, pension and veterans' benefit cheques would be delayed, and visa and passport applications would be stymied.
Programmes deemed essential, such as air traffic control and food inspections, would continue.
The defence department has advised employees that uniformed members of the military will continue on "normal duty status", but "large numbers" of civilian workers will be told to stay home.
Last week, the US House of Representatives a bill that would maintain the US government's funding levels through 15 November but strip funding from Mr Obama's health law, known as Obamacare.
On Friday the Senate passed a version of the bill with the defunding provision removed 54-44, largely on party lines.
"The Senate has acted and we've done it with bipartisan co-operation. We've passed the only bill that can avert a government shutdown Monday night," Democratic Senate leader Harry Reid said.
"This is it, time is gone."
The House is now expected to take up that bill at the weekend. Unless the two chambers can come to a consensus and pass a bill for Mr Obama to sign, the federal government will close on 1 October.
Analysts say House Speaker John Boehner and his leadership team are pushing for the chamber to approve the Senate-passed bill and move on to the debt limit fight next week.
But more conservative members of his restive Republican caucus object, hoping to use the threat of a shutdown as leverage to force a halt to Mr Obama's health law.
That law passed in 2010, was subsequently ruled constitutional by the US Supreme Court, and was a central issue in the 2012 presidential election won by Mr Obama.
After the Senate vote on Friday, Republican Senator Ted Cruz and two other conservative senators denounced the result and vowed to press on with their effort to get rid of Obamacare.
"This will not end here," Senator Marco Rubio told reporters.
'A show' Meanwhile, wrangling over the debt limit extension continues, with the Republicans seeking to win a series of major policy concessions by tying them to an increase.
On Thursday, the number-two Republican in the House, Majority Leader Eric Cantor, said the party would introduce a bill extending the debt ceiling for a year - but also delaying for a year major provisions of Mr Obama's health law.
While Congress narrowly avoided a government shutdown in 2011, the high-stakes political wrangling has become especially chaotic.
Analysts point to infighting in the Republican Party caucuses in both the House and Senate.
Republican Senator John McCain told CBS News on Friday he had never seen such dysfunction in Congress in his three decades as a senator.
"We are dividing the Republican Party rather than attacking Democrats," he said.

http://www.bbc.co.uk/news/world-us-canada-24306933?print=true 

Japan Pummeled By Soaring Food And Energy Prices, Plunging Wages And Ongoing Core Deflation

Last night Japan reported August CPI/inflation news that at least on the surface were astoundingly good: at 0.8%, the core CPI (excluding fresh irradiated food) was more than expected and higher than July's 0.7%. And yet, even the most absurdly clueless economist is silent this morning in their praise of Abenomics, which supposedly has succeeded in its one goal - bringing sexy inflation back. Why? Perhaps the reason is that whereas Keynesian inflation in which prices and wages are broadly if modestly rising as a result of a properly functioning monetary system, is indeed just what the Doctor of modern economics ordered, soaring input costs driven by FX differentials and current account flows, "offset" by plunging wages is precisely the opposite of what Abenomics was supposed to be. Which is exactly what is going on in Japan.
Because a more detailed look at the Japanese inflation number shows that the entire inflationary surge was due to a spike in food and mostly energy prices as gasoline prices rose to the highest since 2008: core core inflation, that which excludes food and energy) was down 0.1% from July, while September Tokyo core core CPI, a leading inflation indicator, was down a whopping -0.4% in August and -0.3% from a year ago. The reason: salaries in July extended the longest slide since 2010, with regular wages excluding overtime and bonuses falling 0.4 percent from a year earlier, a 14th straight drop.
[10]
In other words, all that Abenomics' cratering of the Yen has succeeded in doing is causing gas and energy prices, and to a lesser extent food, to surge, just as we warned would happen in February [11]. And of course, to make a few US-based hedge funds investing in the Nikkei that much richer. From BBG [12]:

The yen’s 20 percent slide against the dollar in the year through August pushed up fuel costs. While the data point to early success for Abe, a sales-tax increase scheduled for April will add to the burden on households and risk dragging on the nation’s economic rebound. Abe is set to announce a decision on the levy on Oct. 1.

Gasoline prices rose this month to the highest since 2008, according to the industry ministry. The nation’s last operating nuclear reactor was halted for maintenance on Sept. 15, leaving Japan without atomic power for the first time since July 2012, and more dependent on imported fuel.

The yen’s 20 percent slide against the dollar in the year through August pushed up fuel costs. While the data point to early success for Abe, a sales-tax increase scheduled for April will add to the burden on households and risk dragging on the nation’s economic rebound. Abe is set to announce a decision on the levy on Oct. 1.

“Without pay increases, households’ purchasing power will weaken gradually,” said Taro Saito, director of economic research at NLI Research Institute in Tokyo. “Abe will have to keep up his campaign on companies for wage growth.”

Abe last week began meetings with business and trade union leaders to press his case for wage increases, key to the success of his effort to spur growth under his economic policies dubbed Abenomics.

Salaries in July extended the longest slide since 2010, with regular wages excluding overtime and bonuses falling 0.4 percent from a year earlier, a 14th straight drop.

Rising prices in the absence of higher incomes have dented consumer sentiment, which could undermine consumption.

Consumer confidence fell in August for a third consecutive month, and sentiment among merchants declined for a fifth month.

So let's see here: a consumption crippling sales tax increase in five days, soaring input prices which are cratering corporate profit margins just as Abe is really begging firms to hike wages, sliding confidence (which in Japan usually is a leading indicator to government change) as consumers can no longer even afford gfasoline, and oh, we almost forget, core deflation. But, hey, look over there, just like in Caracas, the Nikkei is exploding.
Where does one sign up to sing the praises of Abenomics again?

http://www.zerohedge.com/print/479468 

Government Shutdown Odds: 40%, Nomura Estimates

In a world in which everyone has become an ultra-short term pathological gambler, and every outcome is a zero-sum prop bet, it was only a matter of time before someone tried to quantify the probability of the event that the market (for some inexplicable reason) is so transfixed on: the government shutdown (inexplicable, because anything more than a few day shutdown risks a full blown mutiny by the tens of millions of government workers). So without further ado, here is Nomura, with its "estimate" of a government shutdown on October 1: 40%.
From Bloomberg, citing the Japanese bank:

• Not obvious how gap between House, Senate proposals will be closed, and time for negotiations is short, Nomura strategists led by Lewis Alexander wrote in note.
• Shutdown for a couple of weeks won’t have much of an impact on economy; impact of failure to extend debt ceiling "unknown, potentially very large and long lasting"
• Contentious and potentially chaotic fiscal negotiations over next few weeks likely to generate volatility, biggest threat to economy
• If govt shuts down for one week, assuming 36% of non-postal federal employees furloughed, temporary loss of wages, benefits would reduce annualized real GDP by ~0.1ppt
• If shutdown lasts longer, decision on back pay for federal employees likely decisive for consumption
• Week-long shutdown would delay Oct. 4 jobs report
• If debt ceiling becomes binding, Treasury may have to pay debts in order of due date, may not be able to prioritize debt payments

The good news, and we use the term loosely, is the flip-side: the government has a 60% chance of continuing to serve on behalf of the 1% oligarchy on October 1 and well beyond.

http://www.zerohedge.com/print/479494

Seymour Hersh on Obama, NSA and the 'pathetic' American media

Seymour Hersh has got some extreme ideas on how to fix journalism – close down the news bureaus of NBC and ABC, sack 90% of editors in publishing and get back to the fundamental job of journalists which, he says, is to be an outsider.
It doesn't take much to fire up Hersh, the investigative journalist who has been the nemesis of US presidents since the 1960s and who was once described by the Republican party as "the closest thing American journalism has to a terrorist".
He is angry about the timidity of journalists in America, their failure to challenge the White House and be an unpopular messenger of truth.
Don't even get him started on the New York Times which, he says, spends "so much more time carrying water for Obama than I ever thought they would" – or the death of Osama bin Laden. "Nothing's been done about that story, it's one big lie, not one word of it is true," he says of the dramatic US Navy Seals raid in 2011.
Hersh is writing a book about national security and has devoted a chapter to the bin Laden killing. He says a recent report put out by an "independent" Pakistani commission about life in the Abottabad compound in which Bin Laden was holed up would not stand up to scrutiny. "The Pakistanis put out a report, don't get me going on it. Let's put it this way, it was done with considerable American input. It's a bullshit report," he says hinting of revelations to come in his book.
The Obama administration lies systematically, he claims, yet none of the leviathans of American media, the TV networks or big print titles, challenge him.
"It's pathetic, they are more than obsequious, they are afraid to pick on this guy [Obama]," he declares in an interview with the Guardian.
"It used to be when you were in a situation when something very dramatic happened, the president and the minions around the president had control of the narrative, you would pretty much know they would do the best they could to tell the story straight. Now that doesn't happen any more. Now they take advantage of something like that and they work out how to re-elect the president.
He isn't even sure if the recent revelations about the depth and breadth of surveillance by the National Security Agency will have a lasting effect.

Snowden changed the debate on surveillance

He is certain that NSA whistleblower Edward Snowden "changed the whole nature of the debate" about surveillance. Hersh says he and other journalists had written about surveillance, but Snowden was significant because he provided documentary evidence – although he is sceptical about whether the revelations will change the US government's policy.
"Duncan Campbell [the British investigative journalist who broke the Zircon cover-up story], James Bamford [US journalist] and Julian Assange and me and the New Yorker, we've all written the notion there's constant surveillance, but he [Snowden] produced a document and that changed the whole nature of the debate, it's real now," Hersh says.
"Editors love documents. Chicken-shit editors who wouldn't touch stories like that, they love documents, so he changed the whole ball game," he adds, before qualifying his remarks.
"But I don't know if it's going to mean anything in the long [run] because the polls I see in America – the president can still say to voters 'al-Qaida, al-Qaida' and the public will vote two to one for this kind of surveillance, which is so idiotic," he says.
Holding court to a packed audience at City University in London's summer school on investigative journalism, 76-year-old Hersh is on full throttle, a whirlwind of amazing stories of how journalism used to be; how he exposed the My Lai massacre in Vietnam, how he got the Abu Ghraib pictures of American soldiers brutalising Iraqi prisoners, and what he thinks of Edward Snowden.

Hope of redemption

Despite his concern about the timidity of journalism he believes the trade still offers hope of redemption.
"I have this sort of heuristic view that journalism, we possibly offer hope because the world is clearly run by total nincompoops more than ever … Not that journalism is always wonderful, it's not, but at least we offer some way out, some integrity."
His story of how he uncovered the My Lai atrocity is one of old-fashioned shoe-leather journalism and doggedness. Back in 1969, he got a tip about a 26-year-old platoon leader, William Calley, who had been charged by the army with alleged mass murder.
Instead of picking up the phone to a press officer, he got into his car and started looking for him in the army camp of Fort Benning in Georgia, where he heard he had been detained. From door to door he searched the vast compound, sometimes blagging his way, marching up to the reception, slamming his fist on the table and shouting: "Sergeant, I want Calley out now."
Eventually his efforts paid off with his first story appearing in the St Louis Post-Despatch, which was then syndicated across America and eventually earned him the Pulitzer Prize. "I did five stories. I charged $100 for the first, by the end the [New York] Times were paying $5,000."
He was hired by the New York Times to follow up the Watergate scandal and ended up hounding Nixon over Cambodia. Almost 30 years later, Hersh made global headlines all over again with his exposure of the abuse of Iraqi prisoners at Abu Ghraib.

Put in the hours

For students of journalism his message is put the miles and the hours in. He knew about Abu Ghraib five months before he could write about it, having been tipped off by a senior Iraqi army officer who risked his own life by coming out of Baghdad to Damascus to tell him how prisoners had been writing to their families asking them to come and kill them because they had been "despoiled".
"I went five months looking for a document, because without a document, there's nothing there, it doesn't go anywhere."
Hersh returns to US president Barack Obama. He has said before that the confidence of the US press to challenge the US government collapsed post 9/11, but he is adamant that Obama is worse than Bush.
"Do you think Obama's been judged by any rational standards? Has Guantanamo closed? Is a war over? Is anyone paying any attention to Iraq? Is he seriously talking about going into Syria? We are not doing so well in the 80 wars we are in right now, what the hell does he want to go into another one for. What's going on [with journalists]?" he asks.
He says investigative journalism in the US is being killed by the crisis of confidence, lack of resources and a misguided notion of what the job entails.
"Too much of it seems to me is looking for prizes. It's journalism looking for the Pulitzer Prize," he adds. "It's a packaged journalism, so you pick a target like – I don't mean to diminish because anyone who does it works hard – but are railway crossings safe and stuff like that, that's a serious issue but there are other issues too.
"Like killing people, how does [Obama] get away with the drone programme, why aren't we doing more? How does he justify it? What's the intelligence? Why don't we find out how good or bad this policy is? Why do newspapers constantly cite the two or three groups that monitor drone killings. Why don't we do our own work?
"Our job is to find out ourselves, our job is not just to say – here's a debate' our job is to go beyond the debate and find out who's right and who's wrong about issues. That doesn't happen enough. It costs money, it costs time, it jeopardises, it raises risks. There are some people – the New York Times still has investigative journalists but they do much more of carrying water for the president than I ever thought they would … it's like you don't dare be an outsider any more."
He says in some ways President George Bush's administration was easier to write about. "The Bush era, I felt it was much easier to be critical than it is [of] Obama. Much more difficult in the Obama era," he said.
Asked what the solution is Hersh warms to his theme that most editors are pusillanimous and should be fired.
"I'll tell you the solution, get rid of 90% of the editors that now exist and start promoting editors that you can't control," he says. I saw it in the New York Times, I see people who get promoted are the ones on the desk who are more amenable to the publisher and what the senior editors want and the trouble makers don't get promoted. Start promoting better people who look you in the eye and say 'I don't care what you say'.
Nor does he understand why the Washington Post held back on the Snowden files until it learned the Guardian was about to publish.
If Hersh was in charge of US Media Inc, his scorched earth policy wouldn't stop with newspapers.
"I would close down the news bureaus of the networks and let's start all over, tabula rasa. The majors, NBCs, ABCs, they won't like this – just do something different, do something that gets people mad at you, that's what we're supposed to be doing," he says.
Hersh is currently on a break from reporting, working on a book which undoubtedly will make for uncomfortable reading for both Bush and Obama.
"The republic's in trouble, we lie about everything, lying has become the staple." And he implores journalists to do something about it.

http://www.theguardian.com/media/media-blog/2013/sep/27/seymour-hersh-obama-nsa-american-media/print