Including:¬†Boehner’s Plan B doesn’t even make it to vote, the scary underestimation of debt statistics, and the takeover of the NYSE

Good morning

The headlines:

  1. Boehner abandons Plan B.

    Link: hell hath frozen over.

    Boehner’s plan B, which basically included some spending cuts and what he offered on the tax front last weekend (tax hikes on incomes above $1 million, higher capital gains taxes, higher exemption on estate tax, etc), has not even made it to the floor for a vote.

    “The House did not take up the tax measure today because it did not have sufficient support from our members to pass.”

    Now we wait. Again.

    PS: the Republicans aren’t exactly holding it together, it seems…

  2. The acquisition of NYSE.

    Link: no longer a one-trick pony.

    There have been quite a few attempts by the NYSE over the last few years to merge with other exchanges: almost all of which have ended with antitrust disapproval and/or the fall-apart of a hostile takeover bid.

    The last hostile takeover attempt was a joint-effort from Intercontinental Exchange (ICE) and Nasdaq OMX (in April last year), which tried to steal NYSE from its then-pending merger with the Deutsche Bourse. The bid was foiled by the justice department, and the merger “scuttled”* by the European competition authorities.

    Now. Now the ICE is back, without Nasdaq, and it has agreed to buy NYSE Euronext for $8.2 billion.

    In theory, this particular deal has a much better chance of gaining regulatory approval, as ICE deals with derivatives/options-trading/pick-your-specialised-financial-product-trading, while NYSE Euronext is still predominantly equity-based.

    What is interesting is the value change. Last year’s bid was for $11.3 billion. Yesterday’s was $8.2 billion. Value destruction, anyone?

    *There is always negativity around interference from the Competition folk. There must be some secret vocabulary guide for business journalists: because it’s always “scuttled” or “stymied” or “thwarted”. Either that, or they are so bored by the news that they try bejazzling it with online thesaurus searches. Actually, on reflection, definitely the latter.

  3. The Debt you don’t know about.

    Link: it could kill you, on the upside.

    This article brought front of mind something that I’ve been meaning to say for some time.

    We keep talking about debt. And debt-to-GDP ratios. And how we’re going to control it.

    But the issue that we’re not discussing is: what do they mean by “debt”? Because currently, from what I understand, public debt refers to obligations that are currently due, easily measurable, and/or issued in the form of bonds. What ISN’T in there is stuff like government pensions. To backtrack: the government puts in place a social policy whereby it commits to paying people pensions when they retire. This means that the government has an obligation and/or debt as a result of its policy choices today. But because it’s only going to be paid at some point in the future, and because it’s not an absolute figure, official government figures don’t even include an estimate in their statistic.

    Here’s a terrifying website:

    They calculate an estimate of the current US “national debt”, as if the government were required to calculate their debt in the same way the US GAAP and IFRS require companies to measure theirs. That is: you damn well include an estimate of the obligations you have created for yourself in terms of pensions (and medicare, and social policy, in the case of governments).

    Official figures put the National Debt at $16 trillion. Once you take into account Social Security and Medicare obligations: you get to a figure that looks like $60 trillion.


    PS: the net worth of all American households and non-profit organisations including (basically: America – because profit corporations are held as assets by the households), as per the Q3 2011 “Flow of Funds Accounts of the United States” Report released by the Federal Reserve, is about $57 trillion. Which is less than current obligation.

That’s all for now.

Have a good day.