John, this is not just Washington. Did you catch Jeff Cox's piece today on the doomsday scenarios outlined by financial professionals, you know, from Wall Street, which is in New York not Washington, DC. It's up on CNBC NetNet, and I linked to it here. :)
Of course markets are not pricing in a default because they don't believe it will happen, and as many financial professionals are saying, as I am sure you are aware, there is no hedge anyway.
Actually, an extended shutdown, which some of the Tea Party is planning as a strategy to defund the AFA, is a real threat. Along with the sequester that is kicking in, it will reduce government spending significantly, and if carried on long enough, will become a serious economic damper. Talk to Warren about it.
CNBC
Is Washington crying wolf over a default?
John Carney | Senior Editor
1 comment:
Yes! Washington is crying wolf! There will be no default but there will likely be a relapse into severe recession if the debt ceiling is not raised. The only way to not raise debt ceiling and not cause a severe recession is to cancel $2 trillion of Tsy debt held by Federal Reserve via QE asset purchases.
Fed purchases of $85 billion per month is the same thing as the Treasury not issuing that debt in the first place. Cancel that $2 trillion Treasury debt held by the Fed because it is fictitious.... just an illusion.
Unless incoming Fed Chairwoman Yellen decides she has to re-brand her image of a monetary dove to that of a hawk, the Fed will just let those securities mature and roll off its balancer sheet. If they sell it risks a no-bid mother of all bond market selloffs.
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