The Blame Game has started. The elected children are already blaming the other side for being even more childish on the debt ceiling. Unless something is cobbled together today, Bloomberg will be "must-see" TV at 8PM tonight. That's our first opportunity to watch Asia react to America's inability to govern itself intelligently.
Will Asian markets collapse? No, but they will be down heavily. I'll guess a 3% drop could happen, which is a huge one-day move. Once Asia gets comfortable with the fact that we will continue to pay our debts before we pay our people, their confidence will return . . . slowly but never completely.
Will European markets collapse? No, but they could be down even more. While they will also recognize we will pay our debts, they will be reminded that, if the U.S. cannot govern itself as one nation, how will the E.U. govern many nations?
Will the U.S. markets collapse Monday morning? No, but the last time Congress failed us this badly was on September 28, 2008 when the House voted down TARP. The Dow dropped 777 points that day.
Will borrowing costs go up? Yes! Even a small increase means big additional spending by taxpayers. A one-tenth of one percent increase on the debt rolling over in August alone will mean we have to pay an additional $500 million in annual interest expense. Imagine a Congressman proposing we spend an additional $500 million in interest each year . . .simply because we cannot govern ourselves?
For those of us who have railed about the deficit for years, it is no satisfaction that we have finally reached the tipping point.
For those of you who tend to worry too much, please do NOT watch Bloomberg tonight. If you insist on doing so anyway and don't sleep tonight, just remember America has been thru many things worse than this, and the market always reaches a new high afterwards. We are only shooting ourselves in the foot, not in the head!
If you are angry and think Americans deserve better leaders, learn about the redistricting.
