SP 500 and NDX Futures Daily Charts - Tape Winds Up Ahead of the US Debt Level Showdown

Equities were marking time again ahead of the US debt level showdown which may play out next week.

VIX had a bit of an uptake as investors nervously squared off their positions into the weekend.

Have a pleasant evening.

Gold Daily and Silver Weekly Charts - Quiet Trade Post Expiration In the Last Week of September

Today Jack Lew says that the US will hit the debt ceiling on October 17th. I have heard that the stop date is next Tuesday from a legal perspective. I think Lew is talking the practical exigencies of dodgy accounting and the books he is currently juggling.

I suspect that most of what is going on here is political theatre as some of the House Republicans are putting on a good show for their base.

But it is most likely that adults in the government will eventually rein them in after they have played their part and can face their constituent base and say, 'See I tried.'

But given that the US dollar is the world's reserve currency, these antics take on the character of more than just a domestic squabble.  They are stressing the confidence of the world in the US' ability to continue to manage its reserve currency with a rational regard for justice, and the needs of the rest of the world in addition to their self-aggrandizing antics.  I don't think those in the Congress realize that they are providing aid and boosting the morale of the 'opposition' during a currency war.  But they may very well be.  I could easily see China and Russia talking to the members of the Third World and asking them if this is how they wish to continue to invest the future of their nation's wealth.

To on one hand 'manage' the price of precious metals to achieve your goals and one hand, and on the other to engage in stunts and childish antics that bring your own sanity and judgement into question, and encourage people to place their wealth in assets without such serious counter party risk, is self-defeating at least, and verges on the irrational.

There is so much that needs to be done that it is a shame that the Congress and the Administration have lost their ties to the great majority of their constituents, and have instead given themselves over to the most vocal and the wealthiest.

This nonsense about the leaking of the Fed's FOMC decision, that looks like it might have come out of the embargoed news pool, but may have come out of the Fed itself, is very discouraging because it speaks to the corrupt nature of US markets.

The decision by the CFTC to drop its five year 'investigation' of manipulation in the silver market was discouraging but expected. It appears that learning is going to come the hard way, but that is regrettable because all too often it is innocent people who get the harm, and the jokers who gamed the system in the first place see any new crisis as an opportunity for more looting.

But that is just how it goes sometimes. Gold and silver look like safe havens here, but in the short term anything can happen because the Administration and the Congress are too busy with their political gamesmanship to actually enforce the laws that are already on the books.

It is a currency war after all, and one can try and hide much mischief as has been done in the continuing 'crises' we have seen since 1999. But it tends to add up over time.

There was no physical bullion movement in or out of the COMEX warehouses yesterday. October is the next active delivery month.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Low Volume Jibber Jabber

Most of the action in the equity markets was a 'technical trade' because the punters are edgy to take serious positions while the US government's sovereign debt is being held in what is essentially a hostage situation by a minority in government, that does not like the existing healthcare law, but does not have the votes and the sanction of the people to do anything about it other than threaten the US credit rating.

Like a lot of people I thought that a single payer system made much more sense than an extension of the private healthcare insurance monopolies.  But that was not in the cards, and so a compromise was reached.  And now the parties who don't like the compromise which to hold the government debt hostage while they try to get their way.  This is not government.  One could accept civil disobedience amongst private citizens, but in lawmakers it is embarrassing and unseemly.

And I do not believe for one minute that this hostage taking is in the genuine interest because they believe that the law will harm the country. Think about it. They are saying that we think this is going to harm the country, so we will harm the country first, and in a potentially more substantial way. How nuts is that?

No, they are afraid that the law will work, and people will come to accept it. If they really thought it would fail, they should allow it to go forward, with protests, and then use it as a bludgeon on the Democrats in the 2016 election. That is a more usual course of political strategy.

The Banks do the same thing. Regulate us, pass laws that we do not like, and we will crash again and take the system down. That is what comes of a period when the government sets a bad example and its light regard for the law begins to promote anarchy.

Let's be clear on this. No one in Washington is looking particularly good these days. None of them save a few and they face a formidable task, with harsh criticisms rather than support coming from those who would most likely be their supporters, but have given themselves over to lashing out in their frustration.

So let's see how this plays out, as it comes to a head next Tuesday. We will likely see the adults enforce some rational outcome after the players have played their histrionic tune on television for their base.

Have a pleasant evening.

The Financial States of America and Why the European Union Is Inherently Unstable

I am including this because it shows the economic diversity in growth and wealth amongst the States.

And they all function under a common currency. Why does this work whereas the Eurozone is having such problems?

That is because with a common currency union, a political and fiscal union are required as well. This is a hard lesson from monetary theory and history.

When you have a fiat system with a central authority setting policy according to economic conditions over a geographic area in which there is diversity, there must be fiscal policy and transfer payments to 'even out' the effects of that monetary policy.

That is why the European Union is inherently unsustainable, because it is a monetary union without a public policy and fiscal union.

The EU cannot possibly create the appropriate single government, without undue hardship. So they must consider allowing the individual countries or regions to conduct their own monetary policy and have their own currency and exchange rates.


Source: Financial States of America

This chart is from Moneychoice.org.  They are responsible for the data and the figures.