Monday, October 7, 2013

The SBA and contumely

KON-too-muh-lee, kuhn-TOO-muh-lee, KON-tuhm-lee, -tyoo-, -tyoom-) 
Contemptuous or insulting treatment arising from arrogance.
Via French from Latin contumelia (insult), probably from con- (with) + tumere (to swell).

Contumely has caused the government to shut down.

The day before the shutdown lenders rushed to have SBA approve over $½ billion in SBA 7(a) loans.  

That is the most loans ever approved in a single day by the SBA.

You can still get in line and apply for a SBA loan.

Don’t miss out once the SBA re-0pens for business- small business.



SBA LIBOR Base Rate October 2013 = 3.18%
SBA Fixed Base Rate October 2013 = 5.37%

SBA 504 loan Debenture Rate for September 

The debenture rate is only 3.62% but note rate is 3.678% and the effective yield is a whopping 5.698%.


How contumely can one get?

Even though the government has shut down, it still has to borrow money.

The government will run out of borrowing authority October 17th according to the Treasury Department, when it hits it’s the $16.7 trillion debt ceiling.

What exactly is the “debt ceiling”?

The United States debt ceiling or debt limit is a legislative restriction on the amount of national debt that can be issued by the Treasury.  Because expenditures are authorized by separate legislation, the debt ceiling does not actually restrict deficits. In effect, it can only restrain the Treasury from paying for expenditures that have already been incurred.   It is a limit on the ability to make good on its commitments.

If the debt ceiling is not raised by the time the government really runs out of money, the executive branch has the authority to determine which obligations are paid and which are not.  The executive branch’s hands are tied.  It MUST choose to prioritize interest payments on bonds, which would avoid an immediate, direct default on sovereign debt. 

The Fourteenth Amendment (Amendment XIV) to the United States Constitution Section 4 is pretty clear on that: The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.   SHALL NOT BE QUESTIONED.

Keep your eyes and ears open for this week’s auction of 30 year Treasury bonds. 

We will see if anybody is questioning the “public debt of the United States.”

Here is what the 30 year Treasury bond has been doing and this week’s interesting little table:

2001- 5.49
2002- 5.43
2003- ND
2004- ND
2005- ND
2006- 4.91
2007- 4.84
2008- 4.18
2009- 3.89
2010- 4.61
2011- 2.89
2012- 2.77
2013- 3.25

What does all this mean?

I don’t know.

Last month’s $13 billion auction of the securities drew a yield of 3.82 percent.  Since then yields have dropped down to about 3.71 percent.  It climbed to 3.94 percent on August 22, the highest since August 2011.

The Constitution makes it clear that we won’t be defaulting on any debt.   

Article III, Section 3, of the Constitution also clearly defines treason.  Unfortunately the Treason Clause applies only to disloyal acts committed during times of war. Acts of disloyalty during peacetime are not considered treasonous under the Constitution.  So we can’t line them all up in front of a firing squad.

Nobody should be contumely.
When told to use contumely in a sentence, Shakespeare came up with Hamlet’s “to be or not be” soliloquy in King Lear:  "For who would bear the whips and scorns of time, Th’ oppressor's wrong, the proud man's contumely?"    He’s whining about the insults of arrogant men.

Another dose of contumely hits with the news that Monday is a Federal holiday.

According to the Federal Reserve, here are the remaining holidays for 2013:

Columbus Day October 14
Veterans Day November 11
Thanksgiving Day November 28

Christmas Day December 25

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