Tea Party’s Day to Gloat

Unless I miss my guess, today will be the Tea Party’s day to gloat. The Tea Party contingent of the House looked a little too gleeful on Saturday at the prospect of shutting down the U.S. government for an extended period, and if they were cheering out loud on Saturday, they must be positively giddy today. At the risk of paraphrasing, the sentiment seems to be, “They thought we were a flash in the pan, but now we are on the verge of bringing the most powerful country in the world to its knees!” The fantasy of shutting down the government for the whole fiscal year and having ordinary citizens and military families especially (those on active duty must continue to serve during the shutdown but will not be paid) begging for mercy is still alive at this point, and as long as that fantasy is the biggest thing happening, I think it is important to give the Tea Party their day in the sun. Reality will set in soon enough.

Politically, a government shutdown cannot last for months the way Republican political strategists drew it up. With no government, there is no pork-barrel politics, and without that, House members collectively lose much of their influence and financial support. Whether the shutdown is avoided at midnight tonight or lasts for a few days or weeks, the House has already lost much of its credibility from this episode. In the end it may stand as a turning point in American politics, perhaps even, we can hope, leading to a change in the budget process. But all that will come later. Today, there is no need to tell the Tea Party any of this.

Hard Numbers on iOS 7 Release Traffic

I saw for myself the network snarls that surrounded the iOS 7 release a week ago, and people watching the Internet say the spike in traffic was easy to measure. There are a few hard numbers in this Information Week story:

iOS7 Adoption Estimated To Be 60%

I was surprised to read that over the five-day period, Apple accounted for only about 13 percent of all Internet traffic — and of course, not all of that, only about three fourths, was for the iOS download. It is not as if traffic doubled (here and there it did, but not on a large scale). This shows that large parts of the Internet are operating much closer to the edge of failure than we would like, considering that big online events like an OS release come along about ten times a year.

This Week in Bank Failures

The board of directors at Monte dei Paschi balked at the bank’s restructuring plan, leaving the bank with no clear path forward. Possibly the bank could be nationalized and sharply reduced in size, or it could be liquidated in a series of auctions. A majority of directors considered this uncertainty preferable to the endorsement of a plan that the bank did not seem to have any prospect of delivering.

The big question in the United States is whether the country will have a national government next week. The new fiscal year starts October 1, and the House of Representatives voted twice this week to shut the government down rather than fund it for the new fiscal year. Republicans have seized on the health care issue as the excuse for the extended government shutdown they have been planning for months. From what I have heard, a plurality of House Republicans would be more than happy to shut the government down through spring, or even for the entire fiscal year. Others, though, are having second thoughts.

If the government is shut down, this will not be an ordinary shutdown because the Treasury is limited by the debt ceiling, which it projects to hit in the middle of October. The White House would be legally required to start dismantling the federal government, basically following its own path in doing so.

In theory, the Fed and FDIC keep operating as usual in a government shutdown. The OCC, the primary regulator of national banks, shuts down, but so do the SEC, FHA, and others. A government shutdown of a month or two would probably result in the delay of some bank liquidations, but at some point that could turn into a flood of bank failures as banks’ customers run out of money. By December, we could be looking at mass layoffs at Fannie Mae and Freddie Mac as they scramble to stay out of bankruptcy with a suddenly illiquid real estate market and no line of credit at the Treasury.

If the government stays shut through the fiscal year, we would see an unprecedented economic split between states, with about half of states falling into depression, the other half finding ways to keep functioning in varying degrees. None of these scenarios seem likely until I listen to the plans of Republican political strategists. They don’t blink — indeed, they seem almost gleeful — when they suggest they can keep the government shut for six months or longer.

Online Wish List Reminder

Do you have an online wish list or two? Maybe one you had forgotten about?

October 1 is just a few days away, and the Christmas trees will start to show up in the stores, so the time to clean up your online wish lists is now. Find your online wish lists and delete the things you now have or no longer want, before someone buys them for you. I know — who would actually go to the trouble of finding your wish list, looking through it, and buying you a gift? Yet it could happen, so just in case, go through the wish list yourself and make sure it expresses what you want it to.

Big Release Weekend

By several measures Apple had its biggest weekend ever, with the release of two new iPhone models and iOS 7. The latter is not just Apple’s fastest operating system release ever, but the largest online software release event ever. It went remarkably smoothly when you compare it to last year’s large releases. I am still not convinced that the Internet will ever handle these big events without showing the strain.

As for the large numbers of phones sold, it can’t be explained by the surprising new features of the new phone models. They are no more amazing than last year’s model was last year. Nor are the price points the breakthrough that some had predicted. It is more that Apple continues to gain credibility as a phone manufacturer. When you consider how long it can take for an equipment manufacturer to establish a reputation, I guess it makes sense that Apple’s reputation in phones is still growing six years in.