US Debt Ceiling Deal No More — Is the US the Black Swan Event that Nobody Is Expecting?

Mish is reporting that Boehner Walks Out On Obama; "Grand Bargain" Collapses. Here are a couple of quotes from the official statement made by Boehner:
Our economy is not creating enough jobs, and the policies coming out of Washington are a big reason why. Because of Washington, we have a tax code that is stifling job creation. Because of Washington, we have a debt crisis that is sowing uncertainty and sapping the confidence of small businesses. Because of Washington, our children are financing a government spending binge that is jeopardizing their future.

Since the moment I became Speaker, I’ve urged President Obama to lock arms with me and seize this moment to do something significant to address these challenges. I’ve urged him to partner with congressional Republicans to do something dramatic to change the fiscal trajectory of our country . . . something that will boost confidence in our economy, renew a measure of faith in our institutions of government, and help small businesses get back to creating jobs.
During these discussions — as in my earlier discussions — it became evident that the White House is simply not serious about ending the spending binge that is destroying jobs and endangering our children’s future.

A deal was never reached, and was never really close.
The president is emphatic that taxes have to be raised. As a former small businessman, I know tax increases destroy jobs.

The president is adamant that we cannot make fundamental changes to our entitlement programs. As the father of two daughters, I know these programs won’t be there for their generation unless significant action is taken now.[...]
My friend Tony, over at MacroStory mentions:
The real dark horse, black swan, whatever you want to call it may very well be right here in the US and that is BAC stock breaking down as it currently is. At some point the capital markets will shut it out of raising the capital they need even though they say they don’t. The “contagion” to WFC, JPM, etc could very well be the elephant in the room right now that no one is watching.

Anyone notice a lot of people in the administration talking about how they now have Dodd Frank to unwind a TBTF. Imagine the political gain of saying you took down a Wall Street bank. Get the equity low enough, then BAC is either done or requiring another TARP.
On my side, I am wondering if on top of that, what we were calling a charade, a play, a joke — the debt ceiling debate — might not actually lead a real event?

Handcuffing the US government in their spending binge would be a great thing for the US citizens, all the holders of the US, and generally speaking for the prosperity and peach of the entire planet. But hey, this wouldn't be good for the banks and bankers! Guess where do the politicians side?

No comments: