Thread: More Details On What Government Shut Down Would Look Like

More Details On What Government Shut Down Would Look Like

by Tyler Durden
04/06/2011 13:01 -0400
258 comments

• *DJ Obama Admin Says IRS Would Shut Down If Budget Not Passed

• *DJ Obama Admin Says National Parks, Smithsonian Would Close

• *DJ Obama Admin: Cherry Blossom Festival Wouldn't Happen If Budget Not Passed

• *DJ Obama Admin: Roughly 800,000 Govt Employees Would Be Affected By Shutdown

• *DJ Obama Admin: EPA Permitting Would Stop If Budget Not Passed

• *DJ Obama Admin: Social Security Beneficiaries Would Continue To Receive Payments

• *DJ Obama Admin: Electronic Tax Refunds, Collections Would Continue

• *DJ Obama Admin: Military, Law Enforcement Will Continue To Function

• *DJ Obama Admin: Military Personnel Would Earn Paychecks, But Not Receive Them Immediately

• *DJ Obama Admin: White House Staffing Would Be Lower During Shutdown

• *ZH: POMO will continue come rain or snow: Russell 36,000 will not be denied, US bankruptcy notwithstanding

h/t LDT

http://www.zerohedge.com/article/more-d ... would-look

In Case Of Government Shut Down, Close IRS... But Keep POMO Open

by Tyler Durden
04/06/2011 12:49 -0400
64 comments

In order to make the biggest strawman so far in 2011 really scary and nasty, the administration just announced that as part of a government shut down, the IRS would end up being closed. While according to some this is the ulterior motive all along to avoid the premature outflow of tens of billions in cash due to federal tax refunds hitting the IRS next week, which without a debt ceiling hike would push the country into technical default possibly as soon as next week (debt subject to the limit was $14.2 trillion two days ago, just $94 billion under the ceiling and with about $74 billion in debt to be issued next week a $20 billion tax refund withdrawal would push the Treasury over the limit), what is far more amusing is that as the WSJ reminds us, http://blogs.wsj.com/economics/2011/04/ ... /?mod=e2tw the Fed would still be able to monetize debt regardless if the government was operating or not. Ergo nothing can end POMO ahead of time, not even a complete US government shutdown.

"Since it doesn’t rely on Congressional funds, the U.S. central bank would remain open for business as usual, with normal staffing levels. The Fed would therefore be able to continue with its day-to-day operations, such as buying some $7.0 billion U.S. Treasurys on Monday, April 11. The government bond purchases, due to run until June, are part of the Fed’s latest effort to stimulate the economy."

Well, that and about $400 billion for the next 3 months. So in the absence of new Treasury auctions, the Fed would essentially start canibalizing existing debt in circulation even more as no incremental gross debt will be monetized. Luckily for the Fed, the 35% SOMA holdings top is no longer in existence so should the government not issue one bond in the next 3 months, the Fed will still hit $2.9 trillion in total "assets" by the end of June.

Amusingly the WSJ is concerned that the Fed would not have economic data during the span of a long-term shutdown:

One potential danger for the Fed is that the data it needs to take policy decisions to steer the economy in the right direction may be delayed. That would only be a problem if the shutdown lasts a long time, an unlikely scenario.

Still, during a three-week partial shutdown caused by the budget impasse at the end of 1995 and start of 1996, some key indicators on jobs, prices and spending released by the Labor and Commerce Departments were delayed, creating some headaches at the central bank. Then Vice-Chairman Alan Blinder complained it made it harder for the Fed to set interest rates.

Alas, it appears that the WSJ has not yet gotten the memo that the only "economic" indicator the Fed watches for is the Russell 2000. Everything else is goalseeked smoke and mirrors.

http://www.zerohedge.com/article/case-g ... -pomo-open

Good, they can't do any damage or spend money, bunch of idiots that they are