The Sequester Jeopardizes the Recovery: Koutoulas
February 28, 2013 by goldguru · Leave a Comment
Yahoo! Finance
By Bernice Napach
February 28, 2013
Washington is often full of surprises but none are expected before tomorrow, March 1, when $85 billion worth of automatic government spending cuts, a.k.a. “The Sequester” begin to take effect.
The sequester is part of a broader $1.2 trillion plan to cut spending and reduce the deficit that Congress and the White House agreed to in August 2011 in order to avoid a debt ceiling crisis. But it was never supposed to happen.
By including cuts to defense – a Republican sacred cow — and social programs like Head Start — a Democratic favorite — the Washington crowd assumed that a compromise would be worked out on spending and revenues in order to avoid automatic spending cuts.
Never assume, especially in Washington.
Now, less than a day away from the sequester deadline no one is betting against the cuts from taking effect.
The White House has been issuing reports throughout the week detailing the spending cuts in all 50 states and their potential impact, citing slowdown in Superstorm cleanup in New Jersey, teacher layoffs in Ohio, military base cuts in Texas and California etc. and blames it all on Republicans.
“There are too many Republicans in Congress right now who refuse to compromise even an inch when it comes to closing tax loopholes and special interest tax breaks. That’s what’s holding things up right now,” President Obama told a group of shipyard workers in Newport News, Virginia.
Republicans say the White House is using scare tactics when discussing the spending cuts and they continue to oppose tax increases in addition to the ones already agreed upon. “Mr. President, you got your tax increase. It’s time to cut spending,” House Speaker John Boehner (R-Ohio) said earlier this week.
Cuts are slated for 1,200 different programs and could be extended to thousands of more sub-programs and projects. Defense accounts for about half the $85B in cuts; discretionary programs the rest.
Social Security is exempt and Medicare subject to only a 2% cut to providers such as hospitals and doctors. There could be delays in payments for disability claims, delays at airports and even tax refunds
“The big problem with the sequester is [cuts] in the wrong places,” says James Koutoulas, CEO of Typhon Capital Manager and president of the Commodity Customer Coalition. “It jeopardizes this recovery which could make deficits even bigger if you crease tax revenues as well.”
The recovery is fragile. The latest read on fourth quarter GDP shows 0.1% growth—revised from the initial report of 0.1% decline but still almost no growth at all. The Congressional Budget Office says the sequester will reduce growth by 0.6% so it could possibly erase any growth at all — if it’s less than 0.6% otherwise.
As the countdown continues votes are scheduled for the Senate today on two very different proposals to avert the sequester, but none are expected to pass. Democrats have a bill that would replace the cuts with a more gradual plan to shrink the deficit by raising taxes on millionaires and cutting farm subsidies.
Republicans have a plan to give the White House discretion to allocate the $85 billion cuts as it wants, putting the onus—and blame—for the cuts on the Administration. Tomorrow President Obama is scheduled to meet with Republican and Democratic Congressional leaders but at this point little progress is expected.
The president favors some tax increases and closing tax loopholes along with some spending cuts. Republicans won’t agree to more tax increases.
There’s no “easy, one-stop panacea,” Koutoulas says. “Equilibrium is really the key to having a successful system.”
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Patience with gold wearing thin amongst investors
February 28, 2013 by goldguru · Leave a Comment
The gold price slipped again below $1600 per ounce on Thursday to head for its worst one-month drop since May as world stock markets rose.
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Almost 700 mining exhibitors at this year’s bauma
February 28, 2013 by goldguru · Leave a Comment
Details on exhibits from some of the almost 700 mining sector exhibitors at this year’s enormous bauma construction and mining trade event in Munich, the world’s largest.
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150 management jobs could be lost in Lonmin shake-up
February 28, 2013 by goldguru · Leave a Comment
Lonmin is proposing a new operating structure and the 150 positions likely to be affected are expected to be at the management level.
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Zambia asks mining companies to ration power
February 28, 2013 by goldguru · Leave a Comment
Zambia’s Copperbelt Energy Power Corp has asked mining companies to ration electricity due to faults at two of the country’s power stations.
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India needs to reduce its dependence on imported coal – Chidambaram
February 28, 2013 by goldguru · Leave a Comment
Though more coal is to be imported, generating electricity from imported coal is set to become expensive as India removes duty concessions, granted in last year’s budget.
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Chile’s January copper output jumps 8.6%
February 28, 2013 by goldguru · Leave a Comment
Chile produced 474,496 tonnes of copper in January, boosted by higher ore grades and improved productive capacity at some deposits.
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Copper miner Kazakhmys worried by rising costs
February 28, 2013 by goldguru · Leave a Comment
The London-listed copper miner has also had to process more ore to compensate for lower grades from ageing mines.
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Mongolia to charge Rio Tinto interest on tax owed by Oyu Tolgoi
February 28, 2013 by goldguru · Leave a Comment
Mongolia plans to start charging interest on unpaid tax allegedly owed by Oyu Tolgoi LLC, as talks continue over the future of the mine.
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Mali gold output up 15% in 2012 despite turmoil
February 28, 2013 by goldguru · Leave a Comment
Gold ore production jumped to 50.272 tonnes last year, as miners followed through with expansion plans despite a political crisis.
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