Government Default = Black Thursday?

Last week I published a short article on the effects of the Government Shutdown. Today I’ll explain what will happen on Thursday 17^th October if congress does not raise the United States of America’s debt ceiling.

Like many other countries (including Malta) the US collects less money than it spends. This has been happening for many years. The US government’s main source of income is federal taxes while its spectrum of spending is wide. Food stamps, Medicaid, the military and the 2.65 million who are employed by the federal government are examples of where income tax money is distributed internally. The US also pays out billions in financial aid to counties such as Egypt, Israel, Pakistan, Mexico, Nigeria, the Philippines and another 25 countries for “good behaviour”, “good friendship” or military bases. The US is a major contributor to the United Nations, NATO and other international bodies.

Being the most indebted country in the world, the US pays a lot of money in interest on its debt. According to the US Treasury website (http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm) more than $415 billion was paid in interest between September 2012 and October 2013.

In order for the government to borrow more money it needs the approval of congress. If congress does not approve this increase the government will run out of money.

Let us imagine that the US government is a person. This person has a family to support. He has a wallet, a bank account, a credit card and a loan. The bank accounts stand at zero, the credit cards are maxed out and a loan payment is due. His wallet is bone dry. This person has a job but the pay cheque will not cover the expenses.

Now think of congress as the Bank that can approve an increase in this person’s loan facilities. If the loan ceiling is increased the person can cover the additional expenses. If not, …

If the US were to default, the financial markets will probably react very badly and we could risk facing another Black day in which stock exchanges spiral out of control as investors see this uncertainty as a sign to pull out of certain markets. Another effect of a default would probably be that rating agencies downgrade the US. This will result in an increase in borrowing costs. Simply put, instead of paying $415 billion in interest the government would have to pay $800 billion for the same amount of money. This is because investors no longer see the US government as a safe place to invest their money and will demand more interest. It is like having negative notches on your credit rating. Once this happens banks will no longer want to loan money and you would have to go to a pay-day lender or, even worse, a loan shark.

A default would result in a weaker dollar. Since most international business is conducted in this currency, countries who already committed to transact in this currency will suffer because of this unexpected change.

Hopefully the President and Congress see sense before damage is done.

Prime Minister Joseph Muscat visits the Maltese Centre in New York

Prime Minister Joseph Muscat visiting the Maltese Centre in New York were he met representatives of the Maltese community

The Prime Minister and Ms Muscat meet the President and Ms Obama

The Prime Minister and Ms Muscat meet the President of the United States and Ms Michelle Obama during one of the engagements related to the 68th session of the United Nations General Assembly.

Members Unanimously Approve Changes To Stars And Stripes Malta Statute

All registered members of SASM have been asked to indicate whether they want to make fundamental changes to how our not-for-profit organisation functions. The most important change was the introduction of a new Article to our Statute which ensures that every committee member comes up for election every 4 years. It also gives opportunity for aspiring members to come forward and offer their service to SASM as committee members. Members unanimously approved these changes and very soon we will kick off the election process targeted for November.

How to conduct a fair election was one the major issues that had to be dealt with. The global distribution of members required a setup that would be easily accessible by everyone. Since all members have an email address and access to the internet, the committee felt that the most cost-effective solution would be to use an online voting system.

The voting system had to meet certain critical conditions that ensured that elections would be guaranteed fair and that all those who either presented themselves as candidates or who voted would be assured that rigging of the system would be out of the question.

After considerable searching all over the Internet, the solution selected was the one produced by QuestionPro Inc of Seattle, Washington (http://www.QuestionPro.com). Their solution had functions that ensured that the vote would be done securely, ballot stuffing was not possible and that only registered members could participate. Each member received a unique password that only worked with his/her email address. Once the vote was cast the member could not cast his vote again. Another plus for the QuestionPro guys was their online help. Every time we came across a hurdle, a human being was a few clicks away with a solution.

Another cool feature of QuestionPro that made life a lot easier was the ability to control the time the electronic voting boot opened and when it shut.

The committee would like to say a big thank you to all members who voted.

American Association of SMOM to hold Pilgrimage at Ta’ Pinu

Everyone is invited to join the American Association of Sovereign Military Order of Malta (SMOM) on Tuesday 10th September at 10am for a Pilgrimage at Ta’ Pinu, Gozo. This event will be led by Mr Pohrer and Mr Christopher Hyland from SMOM. Afterward Mass which will be said by the Bishop of Gozo.

The SMOM also know as the Sovereign Military Hospitaller Order of Saint John of Jerusalem of Rhodes and of Malta, Order of Malta or Knights of Malta, is a Roman Catholic lay religious order of, traditionally, a military, chivalrous and noble nature. It is the world's oldest surviving order of chivalry. It is headquartered in Rome.

Why Labor Day

Labor Day is to the US what 1^st of May is to Malta. This year this federal holiday comes at a time when the US economy seems to be picking up. With news of companies like GE, Lenovo and Apple in the process of moving manufacturing back to the US, we sincerely hope that this year’s Labor Day celebrations will mark the beginning of a period of economic recovery during which workers will have decent jobs and their basic right to work is fulfilled.

Labor Day was first proposed as a holiday in 1882. Although it is not universally agreed as to who first suggested it, it came during a time when workers typically worked a twelve hour day, seven days a week and earned just enough money to live a basic lifestyle. Working conditions were awful with no concern for the mental and physical safety of workers. Movies such as Modern Times, Silkwood, Roger & Me, The Grapes of Wrath and Norma Rae should help you appreciate what Labor Day is all about.

The first Labor Day march took place on September 5 1882 in New York. The date was chosen because it was felt that there were no holidays between July 4^th and Thanksgiving. Workers first marched from City Hall to Union Square and then spent an afternoon at Reservoir Park being entertained and listening to speeches asking for an 8 hour day. Initially workers would have had to take an unpaid day off to participate in the holiday. Oregon was the first state to make it a holiday on February 21, 1887 and others soon followed.

In 1894 workers at the Pullman Palace Car Company went on strike following a reduction in wages. President Grover Cleveland sent 12,000 federal troops to Pullman, Chicago and violence erupted. A number of workers died in the clashes that ensued. President Cleveland made Labor Day a federal holiday just six days after the strike ended.

The first Monday of September was retained rather than more widespread International Workers' Day (May 1) because Cleveland was concerned that observance of the latter would be associated with Communists.

Many families today use Labor Day to mark the end of summer.

Improving US Entry Process

US Travel Association is a non-profit organization representing all components of the travel industry. According to this organization, the national and international travel industry generates $1.9 trillion in economic output and supports 14.4 million jobs.

US Travel has setup a website at http://www.travelersvoice.org/ to lobby the Congress to make the visitor entry process into the US simpler and more efficient. This can be achieved by employing more people and by investing in technology that will  make the process of entering the USA quicker.

According to surveys conducted by this organisation:

• One in seven overseas travellers missed a connection because of long delays at customs;
• 100 million overseas travellers are away of the negative experience of others from the inefficient customs and entry process;
• Almost 50% of overseas business travels won't visit the Us because of the cumbersome entry process.

If you are a US citizen and would like lobby to make the processes more efficient go to http://www.travelersvoice.org/. Scroll down to the bottom of the page and click the Contact Congress button in the Get Involved section.