U.S. Passes Debt Ceiling, Obama's Secret Order, Another Government Quiting, and Greenspan the Anti-Free Market

According to Zerohedge, the U.S. has passed the debt ceiling today:

Now bear with us for a second: the most recently disclosed total debt was 14,211,567,662,931.23 as of March 28. This excludes the settlement of all of this week's auctions which amount to $35 + $35 + $29 billion (including today) or $99 billion. Adding the two amounts to $14,310,567,662,931.23. As a reminder the debt ceiling is $14,294,000,000,000.00. In other words, the total US debt just passed the debt limit - break out the Champagne! Granted there is a buffer of $52.2 billion between the total debt and the debt actually subject to the ceiling, meaning that America is not in default, yet. Therefore, the total debt subject to the limit assuming full settlement right now is $14,258,341,662,931. Which means the US is now $35.7 billion away from a bona fide breach of the debt ceiling.

Pop the champagne indeed.  With a government shutdown imminent and the debt ceiling slowly closing in, I predict we will see a round of bi-partisanship not seen for years to continue our debt-accumulating race to the bottom.  Hell, Jamie Dimon of JP Morgan pulled a Meredith Whitney today in a speech to the U.S. Chamber of Commerce:

“I wouldn’t panic about what I’m about to say,” Dimon, 55, said today at a U.S. Chamber of Commerce event in Washington. “You’re going to see some municipalities not make it. I don’t think it’s going to shatter America, I just think it’s a part of the credit cycle.”

At least Federal Reserve Bank of Kansas City President Thomas Hoening, the only Fed Prez that can be labeled a "hawk," has acknowledged what those "in the know" already know.  At a speech to the London School of Economics:

"Agricultural land prices, for example, are increasing at double-digit rates," Hoenig said. "High-yield securities in financial markets are demanding price premiums beyond what some would judge reasonable relative to risk." As for rising food and energy prices, "some of the increase may reflect global supply and demand conditions," Hoenig said. But at the same time, "at least some of the increase is driven by highly accommodative monetary policies in the United States and other economies."
"Central bankers must look to the long run. If current policy remains in place, we almost certainly will stimulate the growth of asset values and inflation. This may temporarily increase GDP and employment, but in the long run, we risk instability, damaging inflation and lost jobs, which is a dear price for middle and lower income citizens to pay."

Of course the path we are on looks good for precious metals.  Compared to last semester, it is getting tougher to buy silver one ounce at a time.  Obviously demand is up, but this isn't going to make things any better:

"A week-old strike at Bolivia's San Cristobal mine has totally paralyzed production and exports of silver, zinc and lead, a union leader said on Wednesday. San Cristobal is the world's third-largest producer of silver and the sixth-largest producer of zinc, according to Japan's Sumitomo Corp, which owns the mine."

Union strike? No surprise there.  No surprise in this either:

(Reuters) - President Barack Obama has signed a secret order authorizing covert U.S. government support for rebel forces seeking to oust Libyan leader Muammar Gaddafi, government officials told Reuters on Wednesday.

So after telling us that the U.S.'s only objective in Libya is to establish a no fly zone, Obama changes his mind.  Where oh where is the anti-war left!?
Thomas Friedman has a stroke of genius once in while and today is one of the days.  In his NYTimes column today he lays out how our Middle East policy:

In Libya, we have to figure out whether to help rebels we do not know topple a terrible dictator we do not like, while at the same time we turn a blind eye to a monarch whom we do like in Bahrain, who has violently suppressed people we also like — Bahraini democrats — because these people we like have in their ranks people we don’t like: pro-Iranian Shiite hard-liners. All the while in Saudi Arabia, leaders we like are telling us we never should have let go of the leader who was so disliked by his own people — Hosni Mubarak — and, while we would like to tell the Saudi leaders to take a hike on this subject, we can’t because they have so much oil and money that we like. And this is a lot like our dilemma in Syria where a regime we don’t like — and which probably killed the prime minister of Lebanon whom it disliked — could be toppled by people who say what we like, but we’re not sure they all really believe what we like because among them could be Sunni fundamentalists, who, if they seize power, could suppress all those minorities in Syria whom they don’t like.

You might have to read it a few times to understand it completely.  I know I did.  Strife in the MENA region doesn't look like it is stopping anytime soon. From Reuters:

Kuwait's cabinet is expected to resign on Thursday after lawmakers asked to question three ministers, parliamentary sources said on Wednesday.

Another day, another warning of a government shutdown.

While Hoening may understand what easy credit policies can lead to, Alan Greenspan has major balls acting like he knows what the economy needs now.  The self proclaimed Ayn Rand enthusiast complains in the Financial Times today that Dodd-Frank doesn't go far enough in regulating.  So much for endorsing the free market.  What idiot looks to Greenspan for financial advise after the housing bubble anyway?  In the article, he mentions the effect of unintended consequences, but claims that they are difficult to anticipate.  How does a former Fed chairman not recognize that requiring credit issuers that aren't banks to obtain a credit rating would cause entities such as Ford Motor Credit to withdraw that service?  Why wouldn't making credit-rating agencies legally liable for their ratings on risk cut down on the number of credit ratings issued? MarketWatch has another great example of an unintended consequence of Dodd-Frank today.  In regard to allowing the Fed to limit fees debit card operators can charge retailers:

Banks, however, will take immediate action, as debit fees account for roughly a fifth of checking account revenue. Already, a few lenders including J.P. Morgan Chase  have started to trial increased fees, and others like Wells Fargo have started to phase out debit-card perks they have offered. And lower-income households that have only entered the banking system over the last decade will quickly find themselves bounced out because they’re not profitable enough.

“The rise of free checking wasn’t charity, it was that they were profitable,” said Schmalensee. “Now they are less attractive.”

If you want to listen to an expert on the Fed, look no further than Caroline Baum.  In regards to rational expectation theory and inflation expectation from her Bloomberg column today:

The theory is a central tenet underlying the debate about government intervention in the economy. Opponents of fiscal stimulus claim that the public’s expectation of higher taxes will offset any temporary benefit from government spending.
That’s because human beings behave rationally. Never mind that we just lived through the mother of all housing bubbles, with folks buying homes they couldn’t afford with loans they couldn’t repay. Human beings are rational. Quod erat demonstrandum.
If businesses expect raw materials prices to rise, they will buy more today and stockpile them for the future.
The notion of inflation expectations affecting behavior has been extended to consumers, erroneously in most cases. If households expect gasoline prices to rise, they don’t go out and purchase a 1,000-gallon storage tank for the front lawn. At best, most of us keep two gallons in a gas can to fill the lawn mower.

Human beings are rational?  It's always nice seeing someone as smart as Ms. Baum taking a page from Mises.
If you wanna see a great article on the fiction and facts of the Community Reinvestment Act, check this out from Investor's Business Daily today.  Just a sample:

FICTION: Because the CRA was passed in 1977, long before the subprime crisis, it couldn't have caused the recent explosion in bad loans.

FACT: The toothless 1977 regulations fully expired in July 1997, when President Clinton rewrote them to toughen CRA enforcement as part of a crusade to close the "mortgage gap" between blacks and whites.
For the first time, banks were required to show results. One of the five performance criteria in the "lending test" — the most heavily weighted component of the CRA exam — was adopting "flexible lending practices" to address the credit needs of poor borrowers in "predominantly minority neighborhoods." Banks that didn't bend their underwriting rules risked flunking the exam.

I will end with reporting that Ohio passed a bill eliminating public employees "privilege" to bargain for benefits.  If only pay and working conditions were included.
Here is Rand Paul on Neil Cavuto on overpaid public employees and the government shutdown:

Oh and big news!  Ron Paul is going to appear on the Colbert Report and the View on April 25th!  All together, he will appear on 6 shows that day!

Update- Bill Gross, owner of the world's largest mutual fund and PIMCO, is convinced that the U.S. may default unless either party addresses entitlements (fat chance!):

"Unless entitlements are substantially reformed, I am confident that this country will default on its debt; not in conventional ways, but by picking the pocket of savers via a combination of less observable, yet historically verifiable policies – inflation, currency devaluation and low to negative real interest rates."

The New York Fed has just denied AIG's offer to purchase back the toxic Maiden Lane II residential mortgage backed securities:

The Federal Reserve today announced that it has declined American International Group’s (AIG) offer to purchase all of the assets in Maiden Lane II LLC (MLII).
After careful review, the Federal Reserve Bank of New York (New York Fed) and the Board of Governors of the Federal Reserve System (Board) judged that the public interest in maximizing returns from any sale and promoting financial stability would be better served by an alternative approach to realizing value that is also more consistent with normal market practice.

The Federal Reserve believes that this will maximize sale proceeds while also reducing the likelihood that any one institution ends up with concentrated exposure to these assets.

I will believe it when I see it.  Macro Economic Advisers LLC has just released a chart on which Fed members affect the market the most.  Guess who's number 1?