Source Link: redefininggod.com
Event Watch (Update 54): The Debt Limit Showdown, the Chinese financial product default, and the bank transfer delays
In a concerning sign, I'm detecting language that ups the probability of a staged showdown over the debt limit deadline on February 7. As this Forbes article points out, a debt limit-triggered default in late February or March would be a thoroughly contrived crisis..."...Second, the net debt payments are under $50 billion per month, while total government revenue is expected to average nearly $250 billion per month this year. There is enough money to pay the interest on the national debt. What will actually happen if the debt ceiling is not raised is the Treasury will use accounting gimmicks, which it can do for several months; after that, government would have to cut spending."
Ominously, though, it also raises the specter of the withholding of peoples' tax refunds, which I warned about last October...
"The government most recently hit the debt ceiling in May 2013 and managed to make it until mid-October without running out of money, thanks to these accounting tricks and borrowing, which the Treasury calls extraordinary measures. This time the government may not be able to stretch things out as long because income tax refunds will increase the need for cash. Of course, the government can always delay tax refunds in order to avoid defaulting on the national debt. States have delayed tax refunds numerous times in the past to ease cash crunches, so the federal government could follow their lead."
If February 7 passes without Congress reaching a deal, I'd expect them to lock down the refunds immediately (unless they're planning to use the payout of refunds as the excuse for a default).
On the matter of reaching a deal. the Republican leader in the Senate is "looking for a showdown" according to this National Journal article...
>>>Right now, especially after what happened last fall, it's hard to see the Obama administration compromising on a "clean" debt limit extension, which would have no other policies or spending cuts attached. But McConnell isn't the only one looking for a fight. "The Speaker has said that we should not default on our debt, or even get close to it, but a 'clean' debt limit increase simply won't pass in the House," John Boehner's spokesman Michael Steel said this week.
Back in October, Republicans agreed to pass a clean extension of the debt ceiling at the last minute as part of the deal to end the government shutdown, but did so without the support of most House Republicans. Now, with elections coming up, a vote to extend the limit is even harder for some members to stomach.<<<
Meanwhile, Treasury Secretary Jack Lew is stating (according to this UPI article)...
>>>"When I previously wrote to you in December, I estimated that Treasury would exhaust extraordinary measures in late February or early March," Lew wrote in a letter to House Speaker John Boehner, R-Ohio, and the other top three congressional leaders.
"Based on our best and most recent information, we believe that Treasury is more likely to exhaust those measures in late February,"...<<<
So Lew is threatening a possible default in late February, which is the same timeframe as the end of the Sochi Olympics. If the Occulted Powers are looking to create a big, multi-dimensional crisis to precede the currency reset, a Sochi bombing and Treasury default would set the stage nicely. And all this would occur just a week or so before Sheriff Arpaio releases his new "universe-shattering" revelations about Obama.
In the next update, I plan to address the much-hyped threat to the Superbowl and how it might fit in with a staged Obama takedown.
[Update 51 - 26 January 2014]
China "delays" bank transfers at the end of this month
I just came across a Forbes article which offers this little nugget of sphincter-tightening news...
"...In short, there will be a three-day suspension of domestic renminbi transfers. There will also be a suspension, spanning nine calendar days, of conversions of renminbi to foreign currency.
The specific reason given—'system maintenance' at the central bank—is preposterous. It is not credible that during the highest usage period in the year—the weeklong Lunar New Year holiday beginning January 31—the central bank would schedule an upgrade and shut down cash transfers.
A better explanation is that the country’s banking system is running dry."
To be more accurate, though, the first part of the official notice contained in the article speaks of delays, not a full-out suspension. In light of the scheduled "mega-default" which might occur the day after this "delay" begins (see Update 47 in the link below), I find this development quite interesting
[Update 52 - 26 January 2014]
More on the Chinese financial product default and bank transfer delays
I was in such a hurry to get out the news in Update 51 that I didn't take the time to include my interpretation of what it means. So here goes....
As mentioned in Update 47 (Point 5), the mainstream media have been trumpeting the scheduled default (on January 31) of a Chinese financial instrument called "2010 China Credit-Credit Equals Gold #1 Collective Trust Product." There is concern among some that if that product is allowed to fail, it might result in an uncontrollable financial chain reaction that could cascade through China, then the world.
Interestingly, according to this ZeroHedge article, there is talk in Chinese banking circles of allowing the default to occur...
>>>ICBC has made it clear it will not bailout investors since reputational damage would be "well manageable," and former-PBOC adviser Li Daokui adds that "a controlled default is much better than no default," noting critically that trust defaults "will teach future investors a very important lesson." Belief that contagion can be "contained" brings back memories of 2008 in the US but a total (or even partial) bailout will merely increase the leverage and risk-taking problem and signal government talk of policy reform is not real.<<<
With these points in mind, we see a reason why the Chinese central bank would want to delay bank transfers starting the day before the scheduled default. It will allow them to scrutinize the transfers versus each bank's cash-on-hand to ensure that the flow of money will leave no bank broke. If a bank is short on cash, for example, they can delay outgoing transfers while speeding-through incoming transfers. It will allow them to ration-out the available cash in a careful way.
All this begs the question, though: is their real reason for allowing the default to "teach investors a lesson on moral hazard" or to kick off a controlled implosion of the old financial system?
[Update 53 - 26 January 2014]
Did Gordon Chang screw the pooch?
ZeroHedge is now reporting that the Forbes article is faulty. We'll see how it all shakes out in a few days anyway. So for now...
[Update 54 - 26 January 2014]
Before I put down the keyboard for tonight, let's have a look at the Citibank China notice that started this whole brouhaha. While Point 2 gives the "Spring Festival" as the reason for "Foreign Currency Transfer" being "temporarily not available" for 9 days, Point 1 specifically states...
Important Notice:
1. Due to the system maintenance of People's Bank of China, Domestic RMB Fund Transfer through Citibank (China) Online and Citi Mobile will be delayed during January 30th 2014, 16:00pm to February 2nd 2014, 18:30pm. As to the fund availability at the receiving bank, it depends on the processing requirements and turnaround time of the receiving bank. We apologize for any inconvenience caused.
2. During Spring Festival, Foreign Currency Transfer Transaction through Citibank (China) Online and Citi Mobile will be temporally not available from January 30, 2014 18:00pm to February 7, 2014 09:00am. We apologize for any inconvenience caused.
So Citibank is specifically stating that "RMB Fund Transfer... will be delayed during" the four days "due to the system maintenance of People's Bank of China." As I originally noted, it said nothing about a stoppage, only delays, and it said nothing about these delays being caused by the holiday. It specifically states the delays are to be caused by the PBC. The "as to the fund availability at the receiving bank, it depends on the processing requirements and turnaround time of the receiving bank" part would tend to support my interpretation that the delays are to shore up the banks during a time of possible systemic volatility.
So maybe Gordon screwed only half the pooch.
Again, we'll see what really happens soon enough.For the previous update in this series, click here.
Love always....
