Debt ceiling: “it doesn’t look like markets are tanking just yet”

No, but stocks and bonds are down. Global equity markets are down and safe havens like gold and the Swiss Franc are up. Listen to what Stan Collender has to say on Bloomberg about the debt ceiling talks. He thinks the likelihood of a deal is less than many believe. But, now the bet on whether Congress is to approve increase in US debt ceiling to $15.1T or more before midnight ET 31 Jul 2011 is now down to 34% (hat tip Dave). So markets are clearly catching up to Collender’s view.


  1. David Lazarus

    The markets are not that knowledgeable. The information is out there yet they ignore the facts. Quite frankly I am surprised that the market has been so strong for the last couple of years. It is very over valued right now.

    • This has been liquidity seeking return due to low rates. Look at what I wrote on the Greek and Portuguese downgrades from October 2009 and how funds piled into that debt because of the yield. When the central bank manipulates yield lower, it has unintended consequences.

      As for the market being able to ‘foresee’, that is clearly not the case.

  2. Collender is talking his political book, and he’s had plenty of company. The juxtaposition of breathless headlines and (at most) 1-sigma moves in the major markets over the last 24 hours raises serious questions. Can even the financial press manage to separate the bloodless verdict of the market from editorial content? Is the bias primarily leftward or merely establishment? Are the people fed up with being threatened by their government, and if so what happens when the wolf really comes?

    • David Lazarus

      The bias is definitely not leftward. I have watched a number of financial programs on CNBC and Bloomberg and they are pretty establishment, as far as markets are concerned. It is all supply side and treating the economy as if the problems are structural. Problem for America is that after 30 years of supply side measures they have run their course and are not working. Workers pay in the US has been stagnant for 30 years what more would business want?