Posted on January 2, 2013. Filed under: Debt Ceiling, Economy, Financial Crisis, Fiscal Cliff | Tags: Adrian Vermeule, Alexis de Tocqueville, amendments, American exceptionalism, American people, bill, budget policy, Condoleezza Rice, Congress, constitution, constitutional law, constitutional order, credit rating, deadline, debt ceiling, default, deficit-reduction, Democrats, downgrade, economic crisis, Edgar Perez, entitlement programs, Eric Cantor, Eric Posner, fiscal cliff, fourteenth amendment, grand bargain, Great Recession, Harvard University, House of Representatives, households, Jeffrey Rosen, John Boehner, legal system, Madeleine Albright, Medicaid, Medicare, President Bush, President Clinton, President Obama, President Roosevelt, re-election, Republicans, Senate, spending cuts, Supreme Court, tax increases, The New Republic, U.S. House of Representatives, U.S. Secretary of State, unilateral authority, United States Constitution, University of Chicago, White House |
Last night, the U.S. House of Representatives approved a bill undoing tax increases for more than 99% of households, providing a temporary victory to President Obama and Democrats as Republicans vowed to fight them in the upcoming months for spending cuts in exchange for raising the debt ceiling. The 257-167 vote just before midnight topped a drama-filled day as Republicans initially balked at a bipartisan Senate measure. Ultimately 151 of 236 Republicans voted no. Obama said he’d sign the bill into law.
The final days of the tension surrounding the fiscal cliff of scheduled tax increases and spending cuts illustrated once again the partisan struggle that has made U.S. budget policy unpredictable and prone to crises as deadlines loom. Obama wielded the leverage he gained in his November 6 re-election, securing most of the tax increases he sought without sacrificing the spending cuts he had offered to Republicans in hopes of a larger deficit-reduction grand bargain.
Republicans immediately turned to their next battle, a bid to use the need to raise the nation’s $16.4 trillion debt ceiling to force Obama to accept cuts in entitlement programs such as Medicare. Congress must act as early as mid-February to prevent a default and the dispute may reprise a similar August 2011 episode that led to a downgrade of the U.S. credit rating.
Is the U.S. able to continue giving lessons in American exceptionalism to a world that still respects and admire its past and present? How to explain to the world that current representatives of the American people are able to drive the country so close to a fiscal cliff, potentially dragging the rest of the world? No doubt the majority of Americans have stared at this show with disbelief and puzzlement. Until not so long ago, Americans believed politicians wouldn’t make things so difficult and would reach instead a measured and timely deal. Things didn’t have to go this far to technically miss the deadline.
The answer can be found inside our legal system through the constitution and its twenty seven amendments. In this particular case, section 4 of the fourteenth amendment to the United States Constitution gives the President unilateral authority to raise or ignore the national debt ceiling, and that if challenged the Supreme Court would likely rule in favor of expanded executive power or dismiss the case altogether for lack of standing, as argued by Jeffrey Rosen, legal affairs editor of The New Republic. Furthermore, the president’s role as the ultimate guardian of the constitutional order, charged with taking care that the laws be faithfully executed, provides him with the authority to raise the debt ceiling, as argued by Eric Posner, professor of law at the University of Chicago, and Adrian Vermeule, professor of law at Harvard University.
After the Great Recession of the 1920s, as President Franklin Roosevelt was moving ahead with his plans to confront the economic crisis, he hinted darkly that “it is to be hoped that the normal balance of executive and legislative authority may be wholly equal, wholly adequate to meet the unprecedented task before us. But it may be that an unprecedented demand and need for undelayed action may call for temporary departure from that normal balance of public procedure.” After this admonition, Congress gave Roosevelt the authorities he sought and he did have to follow through on his threat.
Last night Obama said he won’t “have another debate with this Congress over whether or not they should pay the bills they’ve already racked up.” Let’s just hope that President Obama, a former constitutional law professor himself, has the insight and courage to execute the agenda he was elected for leveraging all the tools provided within our constitutional framework. If he is successful, God bless him. If he fails, the American people will kick his party out of the White House in 2016. There is no excuse for inaction; there is no need for more drama; there is no time for more posturing; ultimately, there is no reason to hold America from displaying the exceptionalism Alexis de Tocqueville recognized centuries ago and the world expects for centuries to come.Read Full Post | Make a Comment ( None so far )
For Edgar Perez, Author, The Speed Traders, Increased Volumes and Volatility to Feed High-Frequency Trading on Monday
Posted on August 6, 2011. Filed under: Economy, Exchanges, Financial Crisis, Fixed Income, Securities | Tags: AAA, algorithmic trading, Asia, automated trading, Barak Obama, Blackrock, Capitalism, CBOE Volatility Index, CFA Singapore, CFTC, Chicago, China, CNBC, Commodities, Congress, David Beers, Derivatives, Dow Jones Industrial Average, Economy, Edgar Perez, Equity Markets, Europe, Exchange Rate, Fannie Mae, FCIC, Federal Farm Credit System Banks, Federal Home Loan Banks, Federal Reserve, Financial Crisis, financial markets, Fitch, Fixed Income Markets, Flash Crash, foreign exchange, Freddie Mac, Global Economy, Gold, Golden Networking, Great Depression, Hedge Funds, High-Frequency Trading, High-Frequency Trading Leaders Forum 2011, Hong Kong Securities Institute, Inflation, Moody’s, Nasdaq, Opinion, Oriel Morrison, Pimco, POTUS, recession, Regulation, S&P, S&P 500, Sao Paulo, Securities and Exchanges Comission, shares, sovereign-debt crisis, Standard and Poor's, Subprime mortgages, The Speed Traders, triple-A credit rating, U.S., U.S. Debt Tagged Financial Crisis, U.S. Federal Reserve, U.S. sovereign rating, U.S. Treasury, US Dollar, Value Investing, VIX, Washington, Yuan |
Mr. Edgar Perez, author of The Speed Traders, An Insider’s Look at the New High-Frequency Trading Phenomenon That is Transforming the Investing World (http://www.thespeedtraders.com), wrote on Modern Finance Report (http://www.modernfinancereport.com) that a short-term stock plunge (increase of volume) and a spike in volatility on Monday are reasonably expected given S&P’s downgrade of the U.S. debt rating; the U.S. stock market was coming off its worst week since the financial crisis. “So we have here two of the main requirements for high-frequency trading, volume and volatility. Therefore, it will be reasonable to expect Monday to be a busy day for speed traders, as they provide the liquidity long-term investors will need to survive the day.”
Mr. Perez indicated that he would not be inclined to kill the messenger and instead see S&P’s decision in a positive light as it should serve as an effective wake-up call to get Washington’s warring players to the negotiating table again. He gave the example of S&P’s past decision to put the UK’s AAA-rating on negative outlook in May 2009, which fueled a debate on the need for significant fiscal tightening, and tough decisions taken by the new coalition government, which were eventually rewarded by S&P with the UK’s outlook being revised back up to stable in October last year.
Mr. Perez wrote: “We cannot deny the significant psychological impact of S&P’s decision on the markets and the view of foreign governments and investors of the U.S. economy. However, I expect Monday’ stock plunge to be a short-term event that will lose steam quickly. In fact, investors can be tempted to use it as reason to snatch value plays, as there would have not been a fundamental change from where we were last Friday. At the end of the day, S&P’s main theme, that U.S. finances are in bad shape, is not news to investors and traders; for instance, Pimco, the world’s largest bond fund, had stepped away from US government debt back in March; in addition, savvy money managers had already positioned themselves for a potential rating downgrade.”
Finally, he summarized: “I agree with experts who sustain that the downgrade will not lead to sharp rises of lending rates to the corporate sector or households in the U.S., as Fitch and Moody’s still maintain their top rating for U.S. debt. Also, a sudden sell off of U.S. Treasury instruments looks unlikely, as there are still not many safe assets to replace them. Once the dust settles, attention will turn back to the economic fundamentals. Disregarding the S&P downgrade comes with high risk for the U.S. economy, particularly if Washington prioritizes electoral concerns over the long-term health of this great nation, the United States of America.”Read Full Post | Make a Comment ( None so far )