A Dow drop of almost 200 points Wednesday could be the first tremor of panicky bears preparing to escape an economic conflagration that Congress seems intent on setting off. Will the markets be full of investors with their hair on fire today or Monday as the debt-ceiling deadline looms?

While the House and Senate continue to play chicken, Wall Street (Heaven help us all) looks like the last hope for sanity, as it was in September 2008 when the biggest single-day market crash ever spurred approval of the Paulson bank bailout for unfreezing credit after the House failed to pass it. A loss of $1.2 trillion in market value got their attention.

Now, as the Washington game goes on to avoid default, with the stakes even higher, will the “Greed is good” gang react any differently?

“Investors,” says a New York Times report cautiously, “are seeking alternatives to United States Treasury bonds as worries escalate that lawmakers will fail to reach an agreement…Some have shifted funds into corporate bonds, others are forgetting about yields entirely and parking their money in cash, and more are looking to those classic safe havens of yore, gold and the Swiss franc.

“Investors are getting leery of stocks…”

MORE.

ROBERT STEIN
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ProfElwood
Guest
5 years 1 month ago

Wall Street is also worried about total debt, but that doesn’t seem to come up very often.

merkin
Guest
merkin
5 years 1 month ago
Debt is a long term problem. Wall Street is only concerned with the short term. The debt problem to them is only a problem of interest rates. Wall Street is only willing to settle the debt only if it doesn’t involve tax increases or decreases in domestic spending. That is, Wall Street maybe interested in the debt problem, but it is not that crazy about the solutions to it. This shouldn’t be too surprising, since that was the attitude of the two major parties up to about six months ago. Wall Street’s campaign contributions have been a wise investment on… Read more »
merkin
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merkin
5 years 1 month ago

Reading my post I realize it is a bit obtuse.

To be clear, Wall Street doesn’t want to see any solutions to the debt problem agreed to and implemented now. It will drive the economy further into another recession. Qr prolong the recovery from the last one. They were counting on the gridlock in Congress to prevent any agreement other than an eleventh hour straight raising of the debt limit. In other words, sanity.

ProfElwood
Guest
5 years 1 month ago

You know Merkin, we may have slightly different definitions of “sanity”, but I have to agree that, like most people, they want the goodies without the costs.

DLS
Guest
DLS
5 years 1 month ago

[chuckle] What about the possibly-coming (i.e., threatened) QE3, and if the Krugmans had their way, QE4 after that, much larger?

* * *

Panicky bears? More like decisive, opportunistic bears, but other, ordinary investors maybe panicking. No doubt some (the thinking ones, the real bears) could sell now, and just buy-back afterward.

merkin
Guest
merkin
5 years 1 month ago

The Fed is charged with controlling inflation and minimizing unemployment. If no one else will try to reduce unemployment, and certainly all seem to be working hard to increase unemployment, then the Fed must act.

merkin
Guest
merkin
5 years 1 month ago
Yes, Professor E – greed has no natural limits and is not self-regulating. I know you are a deficit hawk generally, but I am curious if you agree with me that the debt limit hostage taking is not a very good way to accomplish it. And what you think about the debt problem in general. I am truly curious, I am not laying in wait, setting you up for something. You seem to think through your positions and not just take them from a web site or pundits’s mouth and repeat them verbatim like so many here seem to. Here… Read more »
merkin
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merkin
5 years 1 month ago
The really frighting thing is that we are told that all we have to do is pass a balanced budget amendment and everything will be OK. But the things that caused the deficit, unfunded Medicare part D, two unfunded, unnecessary wars, the doubling and tripling of earmarks, increases in the defense budget to fight the ghosts of threats from thirty years ago, irresponsible regulatory policies that caused the Great Recession, and tax cuts on top of more tax cuts, all of these things they promise to continue or even to do more of. And they struggle to come up with… Read more »
DLS
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DLS
5 years 1 month ago

I can’t believe the lefty misconceptions.

The Fed is charged with controlling inflation and minimizing unemployment.

There is no Phillips Curve, as was demonstrated in the 1970s.

“Humphrey-Hawkins” has always been bullshit.

They aren’t doing the best they can for stability when engaging in Quantitative Easing (QE or QEs), flooding the market with more money, either.

As for other misconceptions (balanced budget amendment, long-overdue entitlement reform that will be forced if not sought earlier), [shrug] I suppose some won’t learn until reform is forced.

ProfElwood
Guest
5 years 1 month ago
@Merkin The debt ceiling battle seems to be a pay-me-now/pay-me-later thing. If I thought that there was a chance that congress (and our financial institutions) could turn things around in an intelligent way before complete collapse, I would care more. But the fact that both sides still have sacred cows tells me that they’re either helpless to change it, or clueless. I’m guessing helpless, but the result is the same. The fact is, the entire banking system has become way to complex and interrelated, generating unbelievable instability. We should not, for instance, be greatly affected by the Greek economy, because… Read more »
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