It goes something like this: Republicans will agree to an extension (raise) of the debt limit for six weeks. whether or not the government re-opens is still an open question. Republican leaders meet at the White House at 4:30 pm EDT (note: after markets are closed).
Essentially, the Republicans will propose a six-week extension of the debt ceiling, in order to avoid "default," which is nothing but a scarecrow argument since the US government never was and probably never will be anywhere close to defaulting on any of its outstanding debt, otherwise known as treasury obligations, bonds. bills and notes, because the government takes in 10 times the amount of money that it owes in interest. Paying down the principal may be another thing altogether, but that's not part and parcel of the "default" argument.
Stocks had their second-best session of the year, eclipsing the gains from the first full session of 2013, on January 2nd, but, these gains were based on speculation that the politicians would reach a compromise solution on the debt ceiling and a cntinuing resolution to fund the government. At this writing, neither condition has been met.
Why the timing of today's meeting at the White House is important is because If John Boehner emerges with a scowl and says that they still have differences to iron out, stocks could erase some, all or more of today's gains on Friday. So, the various balls being juggled by the House, Senate and the White House are still very up in the air, which is why playing stocks is sometimes called "investing," and more often defined as "speculation." Today is all speculation.
This brief summary of a portion of Goethe's Faust underscores the nature of today's Western government dilemma:
Accompanied by Mephistopheles, Faust attends the court of a ruler whose empire is facing financial ruin because of profligate government spending. Rather than urging the emperor to be more fiscally responsible, Mephistopheles—disguised, revealingly, as a court jester—suggests a different approach, one with disturbing parallels to our own age.
Noting that the empire’s currency is gold, Mephistopheles maintains there is surely plenty of undiscovered gold underneath the earth belonging to the emperor. Thus, he argues, the emperor can issue promissory notes for the value of this yet-to-be-found gold, thereby generating fresh monetary resources for the government and solving its debt problems.
Not surprisingly, the emperor and his treasurer are delighted with this idea. It means the monarch can avoid making hard economic choices while simultaneously providing the empire with desperately needed currency. Mephistopheles subsequently deluges the court with paper money, and Faust is praised by emperor and commoner alike.
The results, however, are not what are expected. First, the issuance of paper money does not solve the emperor’s spending problems. Instead the ruler and his court become even more extravagant, knowing they can always print more paper money to cover their ever-growing expenses. Second, the devil has subtly but fundamentally changed the basis of the empire’s currency. Instead of being rooted in the solidity offered by a tangible and valued asset, the currency is now based on flimsy paper promises. Thus long-term monetary stability and powerful restraints on extravagant government spending are sacrificed for short-term gain.
Goethe finished writing the second part of Faust in 1832.
In other, national security, news, this report, "$2 Billion NSA Spy Center is Going Up in Flames," caught our attention. Maybe there is a god that punishes evil-doers. Or, maybe karma has a nasty cumulative side=effect?
Dow 15,126.07, +323.09 (2.18%)
Nasdaq 3,760.75, +82.97 (2.26%)
S&P 500 1,692.56, +36.16 (2.18%)
10-Yr Bond 2.69%, +0.04
NYSE Volume 3,368,936,000
Nasdaq Volume 1,814,198,000
Combined NYSE & NASDAQ Advance - Decline: 4773-857
Combined NYSE & NASDAQ New highs - New lows: 204-34
WTI crude oil: 103.01, +1.40
Gold: 1,296.90, -10.30
Silver: 21.90, +0.005
Corn: 438.25, -5.25
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