President Obama

Debt Ceiling Breach Within Days, DC Circus Comes Home

Just when you thought the circus had left Washington comes the news that the United States is within days of breaching the statutory debt ceiling. Last summer’s political debacle that led the the debt ceiling deal and the downgraded of the US triple-A debt rating set up a process tin which President Obama could raise the ceiling in a series of tranches. Never ones to miss an opportunity to be on TV, Congress put a provision in the bill that gives them an opportunity to symbolically disapprove of the raise. It is a meaningless vote, but gives them the opportunity to talk about how the National Endowment for the Arts is such a drain fiscally.

Congress asked the President to delay the raise until they return from holiday recess. In granting them their request, President Obama will force the treasury to use accounting procedures to keep the government functioning until the next raise to the limit is approved. In simple terms it means they raid other budgets for cash such as retirement programs. They are promptly given an IOU that will be paid off with bond sales once the limit is raised.

Over the next few days you will hear every Senator and Representative shout from the floor that a vote to raise the debt ceiling enables reckless spending. In reality a vote no on the debt ceiling would be equivalent to a household deciding which three out of five credit cards they will pay for the month. The reckless spending came when they maxed out the five cards at Macy’s over Christmas. Or in the case of Congress, the giant omnibus appropriations bills. You know the type of bills they stuff the bridges to nowhere in. If they were serious about spending they would focus on those bills, not the debt ceiling.

For the next week you will hear a lot of posturing geared for the election cycle. And that’s all it is. Even the die-hard tea party rep. in his second year in the house really doesn’t want to do anything. Why? Because the reality of the balancing the budget is you cut so hard it shatters the economy or you do a balanced approach which involves taxes. Yeah. Taxes. So in other words, that’s not going to happen. We get a week of political wranglings followed by the premiere of American Idol. At least we have the bases covered.

Stock Futures Climb After Italy Passes Debt-Reduction Measures

As of 7:55 a.m. ET, Dow Jones Industrial Average futures jumped 80 points to 11,935, S&P 500 futures gained 10 points to 1,248 and Nasdaq 100 futures rose 17.5 points to 2,321. Investors seem relieved to see the Italian Senate passing a debt-reduction measure.

European blue chips jumped 1.2%, while the euro climbed 0.3% to $1.364. Meanwhile, the U.S. dollar fell 0.18% against a basket of six world currencies. the English FTSE 100 climbed 0.66% to 5,481 and the German DAX rallied 1.2% to 5,939. In Asia, the Japanese Nikkei 225 edged 0.16% higher to 8,514 and the Chinese Hang Seng jumped 0.91% to 19,137.

Gold rose $10.70, or 0.63%, to $1,771 a troy ounce. U.S. government debt markets are closed for the Veterans Day holiday.

In energy markets, crude oil prices are heading back toward the $100 mark after moderating in recent weeks. The benchmark WTI contract traded in New York climbed 14 cents, or 0.14%, to $97.92 a barrel. Wholesale RBOB gasoline fell 3 cents, or 1%, to $2.61 a gallon.

While trying to avert a complete euro zone meltdown, President Obama spoke with German Chancellor Angela Merkel and French President Nicolas Sarkozy, and then called Italian President Giorgio Napolitano. U.S.Treasury Secretary Timothy Geithner put out calls demanding fast action to avert a crisis. The Italian Senate passed the measures needed to institute debt-reduction. Prime Minister Silvio Berlusconi has promised to resign once the law receives final parliamentary approval.

President Obama Calls On Warren Buffett

According to Josh Earnest, an Obama administration spokesman, President Obama called billionaire Warren Buffett today to seek his counsel. The President is preparing a speech laying out his initiatives for boosting job growth and overall economic health.

Warren Buffett, the CEO and Chairman of Berkshire Hathaway Inc., has served as an informal advisor on the economy to President Obama. The President also called on Ford Motor Company CEO Alan Mullaly, concerning developments in the automotive and manufacturing sectors of the U.S. economy.

“The President and Mr. Buffett discussed the overall outlook on the economy and the reaction to the headwinds we’ve experienced over the last couple of months,” Earnest said. “They talked a little bit about some possible measures that would spur investment and increase economic growth and they also talked about some measures that could address the long term fiscal situation in this country.”

President Obama is planning on addressing the U.S. people about the state of our economy shortly after Labor Day Sept. 5. President Obama’s plan to take action to shrink our nation’s long term deficit will also include steps to give a shot in the arm to the continued unemployment
problem we currently face. We can expect to hear a plan for infrastructure spending, the usual tax incentives for hiring workers, a cut in the payroll tax, and a push for worker training programs. Financial market watchers are wondering if we will hear something new or more of the same.

During President Obama’s bus tour last week through rural Mn, IA, and IL, President Obama was quick to quote from a New York Times opinion piece in which Warren Buffett wrote that the nation’s richest individuals have been “coddled long enough by a billionaire friendly Congress”. Most of us would be willing to make that same quote if we were billionaires too. One wonders if Mr. Buffett would have been so willing to be taxed as a young man on his way towards the American dream. Hopefully Mr. Buffett gave our President some sound advice on moving our sputtering economy forward.

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