So the buzz today is that "a deal" is near, and our economic troubles are over. They've done it! They've slain the beast!
"And hast thou slain the Jabberwock?Two words: Bull. Crap.
Come to my arms, my beamish boy!
O frabjous day! Callooh! Callay!"
He chortled in his joy. - Jabberwocky, Lewis Caroll, 1872
Let's get real. The debt ceiling is going to be raised. No plan that I've been able to see details of actually cuts spending in any meaningful way. Of course, we don't have a debt ceiling in any meaningful way, either. Debt always goes up. The ceiling always gets raised. Can you say "exponential"?
More real: we're not going to default unless the President orders it. Just as the social security checks he threatened about will go out, unless the president orders them not to. We talked about this before and often enough that I feel my blood pressure spike every time I hear some media moron say "default" when they talk about borrowing more. (h/t Zerohedge)
Instead of dangling the default threat every chance they get, Obama and Geithner should be telling the world that the U.S. has every intention, and the resources, to meet its debt obligations. They should shout it from the rooftops, put a banner on the Treasury Direct website, and use the Sunday talk shows to reassure investors, not frighten them.We don't know exactly what's going to happen because terms of the possible agreements aren't being discussed. There's talk of kicking the can to a "special committee" to recommend fixes by Thanksgiving with "automatic cuts" if the congress doesn't agree to specifics. That sounds sufficiently spineless that many congresscritters would vote for it - but didn't they just do that with Erskine Bowles/Alan Simpson commission? If they didn't listen to that commission, why would they listen to this one?
But the debt ceiling going up was a foregone conclusion. The Stupids only control 1/2 of the legislative branch which is 1/3 of the government (or less - think of the czars and the bureaucrats). They simply don't have the power to do anything other than try to prevent anything from getting to the president. Which isn't such a bad option. Except it leads me to think he would take that opportunity to do what he wants and dare the rest of us to stop him. "So sue me".
In my book if nothing changes, nothing changes. The long term prognosis is still grim. The chances of economic collapse are still great, the chances for QE3 are still high, and the fact that some really bad times are coming is bet-your-life guaranteed. On this trajectory, we eventually do default and collapse as a country. Not because of this, but because eventually, no one will buy our bonds. Right now, the dollar is doing well, because the whole world's financial system is as solid as jello, and they reflexively think the dollar is safe.