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A leading economist explained the other day that “financial markets in the U.S. are giving [default] a 0% probability of happening,” basically because investors believe “there’s no way” Congress “could possibly be this stupid.”
Say hello to non-zero probability — and the realization that Republicans might just be this stupid after all.
Moody’s Investors Service said Wednesday it has put the U.S. government’s top-notch credit rating on review for a possible downgrade because of the risk that Washington will not raise the federal debt ceiling in time to avoid a default.
The firm added that even a brief failure of the government to pay its bills would mean that the United States’s AAA rating “would likely no longer be appropriate.” […]
The U.S. has long been able to borrow money cheaply because global investors believe the government can be counted on to repay its debts. If credit rating agencies downgrade the U.S. and investors lose their faith in the creditworthiness of the government, the cost of borrowing money — in other words, the interest rate — could rise.
This caused a considerable stir late yesterday afternoon, and for good reason. The Republicans’ hostage strategy is starting to shift from scary to terrifying.
But there’s no reason this warning should have surprised anyone. A month ago, Moody’s Investors Service made clear the nation’s AAA credit rating is at risk of being downgraded by mid-July — well before the August 2 deadline — if it looks like failure is even a possibility.
Well, guess what, folks. It’s July 14, and the negotiations are going backwards. Moody’s wasn’t kidding.
In a sane political environment, this would prompt Republicans to reconsider their radical tactics. In our political environment, this will lead Republicans to proclaim, “You better hurry up with that ransom.”
What’s more, among others in the financial industry, who’ve long assumed that this posturing would be resolved long before there were real-world consequences, anxiety levels are rising.
In several recent reports, analysts at some the nation’s largest banks are resorting to truly hyperbolic terms in an effort to warn lawmakers and investors alike about the fallout of the debt limit being breached.
“Asking what the U.S. economy might look like after a possible U.S. Treasury default is akin to asking ‘what will you do after you commit suicide,’ ” wrote Steven Wieting, Managing Director in the Economic and Market Analysis team of Citigroup, in a July 11, 2011 report.
Wieting added that in his industry, “No one thinks any of this is funny…. You are talking about a catastrophic financial event.”
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Bull_City on July 14, 2011 8:37 AM:
Seriously folks.....as Steve's said many times...5 minutes, clean bill to raise the debt ceiling and just pass the damn thing!!!
FRP on July 14, 2011 8:43 AM:
Well well well well
The abusive spouse just couldn't get comfortable living with an equal , tsk .
Yeah I hate to read about the thousand year party of Booshc and Cheenie running into a ditch . Wotta hitch on the ride to Valhalla .
On the bright side , our hot Republican spice can be used to keep the rats outta the ditch their driving us into .
Daniel Kim on July 14, 2011 8:44 AM:
"In a sane political environment, this would prompt Republicans to reconsider their radical tactics."
Huh. In a sane environment, we wouldn't be having this conversation.
j on July 14, 2011 8:45 AM:
Well, we must keep Murdoch's ability to use accelerated depreciation on his corporate jet! (By borrowing money & having the middle class pay with their
social security.)
c u n d gulag on July 14, 2011 8:45 AM:
I think there are some Republicans who know what's going to happen, and are hoping someone/thing comes and saves them, since they seem to have NO control over the raving lunatics in their ranks..
I think there are also those who are too stupid to realize what they're doing and the consequences.
And then there are those who don't care, or don't think it'll make any difference to the US and the world.
And it think there are those who WANT the worst to happen - either for the thrill of it, or what they see as the opportunity disaster and catastrophe may present.
Either way, this is the lack of governance you get when you have an angry, and ill or mis-informed people showing up to vote, and the rest sat on their asses, bitchin' about something.
The Teabaggers are screaming "JUMP!!! JUMP!!!"
And too many of the morons that they put in both Houses are standing at the edge, ready to go.
Tragically, they may pull the rest of us with them.
Remember, call your Republican representative today with your "DEBT THREAT!"
Just be careful to enunciate it carefully!
walt on July 14, 2011 8:52 AM:
I was chatting with someone who said he wish Democrats would stop being bullies and let Republicans pass some bill. I demurred, at which point he went into a default rant about liberals.
I think we all know how this is going to turn out. McConnell's bill or a variant will be signed by Obama and the blame game will burrow even further into our national psyche. Part of me wants to have this showdown if only to let Americans know what's truly at stake. But the negotiation process in all its grubbiness showed that liberal principles are very pliable whereas conservative ones are rigid. Even here, however, liberals lose because of the "he said/she said" game the media play. For all our willingness to negotiate with hostage takers, we still don't get credit.
Brinkmanship will be tolerated only briefly before the guardians of our discourse turn on Obama and tell him to give the tantrum caucus the cookies they want. While I appreciate the difficulty here for the president, you can't play this game without your base and a good part of the media backing you up. Tea Party maniacs are driving this extortion because they're loud, stoked, committed and crazy. Where's our side in all of this? Typing stuff in blogs.
DAY on July 14, 2011 8:52 AM:
Let us not forget that these same "Ratings Agencies" also gave high marks to the Wall Street shenanigans in 2008 that led us the edge of this abyss.
Mr. Serf Man on July 14, 2011 8:53 AM:
But But the Triumvirate of Stupid Ghomert Bachmann King tells me its all a big lie
http://www.huffingtonpost.com/2011/07/13/gohmert-bachmann-king-debt-limit_n_897145.html#s280957&title=The_Stock_Market
As long as these types are given airtime with no rebuttal from the MSM . Chis Matthews took King apart last night but apart from a few of us here who watch his show.....
nobody to push back
MattF on July 14, 2011 8:58 AM:
Well, the wingers apparently believe 1) the warnings of catastrophe are a big lie, 2) the Kenyan-Muslim-soshalist-illiterate-affirmative-action-snob in the White House will cave, 3) the magic capitalism fairy will come to the rescue when taxes are slashed. So, go argue with them, I give up.
ComradeAnon on July 14, 2011 9:12 AM:
Why can't Wall Street just get the rating agencies to leave our rating as is? If they can get them to rate Junk or Subprime as AAA, they can certainly justify leaving the U.S. as AAA. Where is Wall Street when you actually need them?
T2 on July 14, 2011 9:25 AM:
There is much said along the lines of what Gulag says - that the reasonable Repubs have no control over the crazy Repubs. But the facts say otherwise. The number of TeaBag congressmen on the GOP side is the minority of that party's representation. Not the majority. The one and only thing keeping the "reasonable" Repubs from telling their more insane brothers to STFU is fear of losing their jobs. Fear that if they don't go along with the Crazy Wing of the GOP, they'll get primaried and lose their POWER. At the bottom of the GOP barrel is the pure lust for power and money. The McConnell's and Boner's of the GOP are scared to death that their days in the tanning parlor and on the Golf Course (with the round being paid for by Exxon) will be over.
That's why they bend to the crazies. And the crazies are crazy.
Ron Byers on July 14, 2011 9:29 AM:
I mentioned to my wife that her mother might not receive her social security check in August. She said "what?" I repeated myself and explained what was going on. She looked at me in amazement. Did I really think the Republicans would be so stupid. I said until Cantor took charge of the house I didn't think so, but now, better start planning. Then it dawned on her, we work for a government contractor. We might not receive our checks next month too.
The good thing is I don't think it will last long. The bad thing is that it will happen at all.
Steve, I don't follow Fox. What are the Fox Republicans being told?
RepublicanPointOfView on July 14, 2011 9:40 AM:
Never underestimate the power of human stupidity. Robert A. Heinlein
This just shows how human the Congressmen are that we own!
Josef K on July 14, 2011 9:41 AM:
Warnings like this aren't likely to make a dent in the idiots in the GOP caucus. And given Boehner and McConnell are exposed as non-leaders...
Whatever 'contingency plans' are being discussed and readied had better be good. I doubt the markets will be able to stand the tension much longer.
bdop4 on July 14, 2011 9:45 AM:
"I was chatting with someone who said he wish Democrats would stop being bullies and let Republicans pass some bill. I demurred, at which point he went into a default rant about liberals.
. . . . . .
While I appreciate the difficulty here for the president, you can't play this game without your base and a good part of the media backing you up. Tea Party maniacs are driving this extortion because they're loud, stoked, committed and crazy. Where's our side in all of this? Typing stuff in blogs." - Walt
I take it that you're putting yourself up as Exhibit A to the problem.
Listen, I'm not saying you have to get into a pitched argument with every nutcase you run into, but I can't help but see the irony here.
As long as we allow people to engage unchallenged in "default rant[s] about liberals," we're going to have this problem.
Question: was there anyone else listening to him, or was it just you?
I'm sure we all have challenged these people from time to time, and had mixed results, so I can understand if that particular instance you figured it wasn't worth the time, but I think we all need to pick up the gauntlet more.
Especially if there are others listening.
FRP on July 14, 2011 10:05 AM:
And Now For Something Completely Different !
Same as it ever was...Same as it ever was...Same as it ever was...
Same as it ever was...Same as it ever was...Same as it ever was...
Same as it ever was...Same as it ever was...
If you were looking for an argument with a Teu Baggeur you came into the wrong room , this room is stupidity , silly .
Bob zm on July 14, 2011 10:07 AM:
The ratings agencies are acting with fiduciary prudence, for they should have lowered the US rating already in reaction to the GOP public threat of pushing the US to default. This is no joking matter; it is about money.
Bob M on July 14, 2011 10:08 AM:
Sorry - "not acting"
jjm on July 14, 2011 10:13 AM:
This is no less than an attempted coup d'état by the extremely stupid and venal against the smart.
Face it, the IQ of the GOP members has to be at least 25% lower than the Democrats in Congress and certainly in the White House.
And that is a most dangerous situation.
LL on July 14, 2011 11:27 AM:
I'm thinking of the Ned Beatty character in Network. He would do one of two things.
He would call Boehner, ask for a conference call with the entire GOP caucus, and say, more or less "If you guys don't vote to raise the ceiling right now, we will destroy you. You'll have to look up to tie your shoes. You'll be on the street."
Or, more likely, he and his people would just short US gov't debt and make a killing.
This should not be happening. We let our MSM be completely corrupted, this is what we get. An informed voting population would bury the GOP for this.
Trollop on July 14, 2011 12:00 PM:
International monetary terrorists!
Off to Guanatanamo with them!
GreenDreams on July 14, 2011 7:00 PM:
This will be over when Wall Street and the Chamber get serious. Sure, they sent a letter. But does anyone doubt what would happen if the Chamber and a few other big donors turned off the spigot to GOP campaigns? They'd cave in a heartbeat. Let's hope they speak up soon.
Doug on July 14, 2011 9:38 PM:
Am I the only who's failed to note President Obama demanding, or even just asking, for a "clean bill"? How many of those "not insane" Republicans would JUMP at the chance to vote for such a piece of legislation? As opposed to, say, "owning" "The Great Depression 2.0"?
Which, currently, is their only other option...