Here's the scariest story of the last 24 hours.
From Reuters "Republicans may push debt talk to the 11th hour"
People who need to withdraw fund from their mutual funds for say, something like paying next falls college tuition might be well-advised to take it out soon, before more political theater cuts into their investment earnings.
If you're thinking of taking out a home improvement loan or buying or refinancing a house, seems there would be risk waiting until May.
And because financial markets are much better at anticipating risk, some have probably already put the "political mayhem" discount in their trading. DJIA was down 100 points the day this story broke.
Imagine that.
Here's the essential parts of this news story from Reuters:
Senate Republican Leader Mitch McConnell and Eric Cantor, the No. 2 Republican in the House of Representatives, fired the opening shots in what is expected to be a bitter fight with the White House over increasing the U.S. borrowing limit to enable the country to keep paying its debts.
Prolonging negotiations past mid-May when Washington will hit its debt limit could give Republicans more leverage to secure big spending cuts, but it could worry investors as the country runs up against a possible default. The Republicans said they would act before that happened.
Experts warn the country could eventually face a Greek-style debt crisis, and the International Monetary Fund urged the United States on Tuesday to outline credible measures to reduce deficits.
The government will run up against its current debt limit of $14.3 trillion by May 16, according to the Treasury Department. Without an increase, the country would default on its debt, roiling bond markets and pushing up interest rates for businesses and individuals.
Republicans say they plan to push the vote to between Memorial Day and July 4.
Here's what another source in Reuters said:
"I think that's the wrong thing to do," said Lou Brien, a market strategist with DRW Trading Group in Chicago. "It risks the perception of default, and I think right now the market is thinking that there will be more adults than that, but we will see how that plays out."
Mary Miller, Treasury's assistant secretary for financial markets, said it would be "highly disruptive" if Congress did not raise the debt limit before the current ceiling was reached in mid-May.
Hang on to your pocketbooks and mutual funds people.
I wouldn't be surprised to see continual selling in markets, creep in interest rates until there is some sign of compromise on this debt agreement.
Subscribe to:
Post Comments (Atom)
I would encourage you to read "Endgame - The End of the Debt Supercycle and How It Changes Everything" by John Mauldin. Even more highly disruptive than not raising our debt ceiling will be continuing to spend more than our revenue.
ReplyDeleteSeriously, how does raising the debt ceiling to allow the government more borrowing provide the government the ability to pay it back?
ReplyDeleteAll it does is delay the day of reckoning rather than making the tough decisions that we now MUST make. Everyone - EVERYONE - knows the federal government can't pay back our current $14.3T debt, what on earth makes anyone think our government can pay back $16T or $18T or $20T?
The choice is to default on $14.3T or default on $20T two years from now.
I'd rather suffer the consequences of defaulting on $14.3T today so we can address these problems NOW rather than pushing them off to when Barack Obama and Tim Geithner - the two responsible for this run-up in debt and the two responsible for squandering the nation's wealth - are out of office when the debt is even higher than it is today.