Thursday, July 28, 2011

Washington's Political Games are Now Affecting Main Street

Here is a post from the Calculated Risk blog site identifying the first big rumblings from the credit markets. The idiocy of the "debt ceiling" is now affecting the real world and will quickly ramp up over the next three days:
Debt Ceiling Charade impacting Short-Term Credit Markets

From the NY Times DealBook: Debt Ceiling Impasse Rattles Short-Term Credit Markets
Over the last week, big banks and companies have withdrawn $37.5 billion from money market funds that invest in Treasury debt and other ultra-safe securities, the biggest weekly drop this year. Meanwhile, in the vast market for repurchase agreements, in which many financial firms make short-term loans to one another, borrowers are beginning to demand higher yields.
From the WSJ: Default Worries Dry Up Lending
Banks ... are scrambling to design emergency plans to avoid a trading logjam in the huge markets for Treasurys and short-term funding facilities if Congress fails to raise the U.S. borrowing limits by next Tuesday's deadline.
Trading executives from the largest Wall Street dealers agreed on a Wednesday conference call, conducted by the industry trade group the Securities Industry Financial Markets Association, to a number of procedures to trade Treasury bonds if the U.S. misses a payment on its debt.
From CNBC: Will Debt Feud Clip Future Economic Growth?
Washington's political feuding over the deficit has damaged business and consumer sentiment in an already weak economy ...
I've heard comments from several executives this week that business has slowed sharply over the last week. People are getting nervous.

I've been trying to ignore the charade - obviously Congress will agree to raise the debt ceiling and pay the bills - but it is now impacting the economy.
Sadly, the inmates are running the asylum. The fanatics don't care that they are destroying the US economy. Those who elected these crazies had no idea that this was the "mandate" they gave them. It reminds me of the poor German people who voted in the Nazis in 1932 not knowing that they would crush the Reichstag and bring democracy to an end in Germany and then plunge the country into a war that would leave the cities destroyed and most of a generation of men dead. But that is what you get when you play footsie with fanatics.

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