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Government

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What's Closed in a Government Shutdown

Today has surprised some people who went about their daily business without knowing what's closed in a government shutdown.

Another surprise: Markets didn't plummet. There are a few reasons for that:

  • The government isn't entirely closed.
  • A closing isn't as uncommon as it is being made out to be. Government shutdowns have occurred 18 times since 1976.
  • Negotiations are still being talked about behind the scenes.
  • Markets are really more concerned about the debt ceiling deadline (which is now Oct. 17).

And assuming a deal is reached sometime within the next few weeks, the impact on fourth-quarter economic growth from this U.S. government shutdown is expected to be relatively minimal. Any loss is expected to be easily made up in Q1 of 2014.

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Washington

Why the Government Shutdown Is Good for Investors

The markets are already nervous over a stubborn group of Republicans threatening a government shutdown unless Democrats agree to defund Obamacare, or at least delay implementation of the healthcare law another year.

"A government shutdown starting next week is looking increasingly likely," Jim Russell, a regional investment director at U.S. Bank, told the Associated Press. "That will not be welcomed by the capital markets."

The S&P 500 has slid 2% since Sept. 19 as Wall Street watches yet another budget-battle spectacle unfold in Washington.

The problem is that the federal government only has enough money to keep the government's doors open through Sept. 30, the end of its fiscal year. Tea Party Republicans are using this deadline to try to defund the healthcare law.

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Washington

U.S. Debt Ceiling Debate: What Will Happen

A U.S. debt ceiling debate is once again on Congress' agenda. Congress has about three weeks to pass a budget, and the White House has said that U.S. President Barack Obama will not negotiate over raising the 2013 debt ceiling provisions.

We've seen this script before on debt ceiling deadlines, and with so many other pressing issues. Congress will again kick the can down the road.

Before that, a brewing showdown will again unfold, one with distinct consequences for other forms of legislation and the country.

Wall Street

Jon Corzine: The Face of American Crony Capitalism

This week, House Republicans called for a criminal probe of Jon Corzine, the former New Jersey governor and former CEO of MF Global. Republicans allege that Corzine may have committed perjury when testifying in front of Congress after his firm's collapse.

Actually, Corzine personally ran MF Global into the ground.

In October 2011, MF Global declared bankruptcy after Corzine made a bad bet on $6.4 billion in European sovereign debt. After the collapse, more than $1.2 billion in client funds went missing.

Corzine has denied any wrongdoing, even though recorded conversations suggest that Corzine was directly responsible for illicitly redirecting customer funds.

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Washington

Why the Dodd-Frank Act Didn't Work

On July 21, the Dodd-Frank Act turned three years old.

But, unlike most three-year-olds who can walk and talk, this one hasn't gotten out of the crib yet…

You see, the Dodd-Frank Act was a promise to protect Americans from the excesses and ruthlessness of Wall Street. It was meant to streamline the regulatory process.

But three years later, we are still waiting for its full implementation.

In fact, as of last week, only 155 of 398 rules required by this law are considered final.

That's because instead of focusing on the systemic problems that caused the crisis, the pen to write the bill ended up in the hands of disconnected agencies and lobbyists.

Instead of fixing the serious problems of current law, Dodd-Frank failed to curtail Wall Street – just a few years after a major financial crisis.

At a time when Sen. Elizabeth Warren, D-MA, and Sen. John McCain, R-AZ, have pushed for a new Glass-Steagall Act to reduce risk, some voices like Treasury Secretary Jack Lew argue that the Dodd-Frank bill will alleviate the problems of Too Big to Fail, systemic risk, and cronyism.

But we know that such arguments are spurious at best.

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Washington

President Obama's Grand Bargain is DOA

In attempts to break the fiscal stalemate lingering in Washington, D.C., U.S. President Barack Obama claims he's ready to do some serious "grand bargaining"…

The president presented his so-called grand bargain plan Tuesday during a trip to an Amazon.com Inc. (Nasdaq: AMZN) distribution center in Chattanooga, TN. The controversial proposal includes cutting the corporate tax rate, long-favored by congressional Republicans, in exchange for stepped-up spending on jobs programs.

"I've come here to offer a framework that might help break through the political logjam in Washington and get some of these proven ideas moving," President Obama said.

The GOP, unmoved, immediately slammed the suggestions and cast doubts about the plan's prospects.

And the "grand bargain" turns into just another speech…

Washington

Why Doesn't Jack Lew Support the New Glass-Steagall Act?

You'd think that in the wake of the Great Collapse of 2008, reviving the Glass-Steagall Act would be a no-brainer.

As it happens, there are quite a few powerful members of government who oppose it, including Treasury Secretary Jack Lew, who seems to be pushing Dodd-Frank and the Volcker Rule a little too hard as the only regulation that's needed to keep the banks from making bad bets in toxic derivatives again.

But a little history lesson will show why his plan won't work.

In the wake of the Great Collapse of 2008, it was clear that we needed legislation that tightly regulates the big banks and their investments while encouraging economic growth.

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Washington

DON’T BE SO ARROGANT, MR. PRESIDENT

Editor's Note: Romulus Augustus, the last emperor of Rome, had a lot of time to think about what went wrong to cause the fall of the greatest empire in history. Here, for the first time, in this exclusive essay he tells the full story of the fall and gives Obama sage advice to our Chief Investment Strategist, Keith Fitz-Gerald on how to avoid the same fate in the US. Please forward this to interested friends or family members.

My name is Romulus Augustus. I was the last Roman Emperor. Though I only ruled a few years before giving up my throne on 4 September 476, I lived for at least another 25 years according to the tax records. I drew a pension until at least 507 according to Cassiodorus. And, in doing so, had plenty of time to think about what went wrong.

I have made the journey through time to offer my counsel and perspective lest your country repeat the same damning mistakes that ended centuries of Rome's greatness.

Let's begin at the top.

When I took the throne, the puppet masters held sway over the citizens. Theoretically, the citizens ruled Rome but sadly, true power was held by those who served as their representatives. The concentration of power is very real when it is the diffusion of power that best serves liberty.

Do not let your representatives take this for granted.

America, like Rome, will cross the most dangerous lines once voters figure out that they can entitle themselves. You will go from a nation of makers to a nation of takers.

We learned the hard way as our treasury became a proxy for a handout. Our citizenship changed radically and so did our elections. Towards the end, our political process was not about who would build a better future for the Empire, but who would be least likely to take away the handouts.

We tried giving the people free wheat as the progressive minds of our time thought that would change things. In reality, it made them worse.

Big Data

Goodbye Privacy: Big Data Is Coming to Town

Just like the Christmas song, "He knows when you've been sleeping, he knows when you're awake, he knows when you've been bad or good…"

But nowadays it isn't Santa, it's Big Data. And it's becoming big business.

What can companies do with big data?

Get this:

The Fed

Larry Summers Should Not Be the Next Federal Reserve Chairman

Just this week, the Wall Street Journal reported that former Treasury Secretary and Harvard
President Larry Summers is "hell-bent" on becoming the next U.S. Federal Reserve Chairman.

The more important issue, however, is whether Americans should want Summers involved in such a prominent role in the global economy.

Arguments that favor Summers center on the fact that when the building clears out in 2014, Summers will be one of the few individuals left with significant experience in the international financial system. With Timothy Geithner gone, Ben Bernanke leaving in 2014, and departures of David Lipton at the IMF Michael Froman at USTR, Summers is considered one of the last "battle tested" individuals left. He has significant experience following the 1994 Russian crisis, the 1997 Asian Crisis and the 2008 Great Recession.

But while experience in necessary, so is the importance of accomplishments.

Critics have argued that handing the keys of the U.S. economy to Larry Summers would be equivalent to allowing a blind sheepdog to protect Americans from wolves. Summers' past 25 years of experience is riddled with questions about his ability to understand crisis, his commitment to corporate influence, and his irrational pledge to illogical academic arguments.

Given that few in Washington seem to vet political appointees of this administration, we decided to explore several important questions about Summers' potential candidacy and past understanding of the Federal Reserve's role in the global economy.