Calm Your Fears About That Debt Ceiling

At its most fundamental level, the U.S. is divided by two competing visions of the size and role of government in society. The division runs along social, economic and, most important, geographic lines. Until the divisions are resolved, the sort of power struggle we are seeing now will return regularly. Company managements should plan on a high level of instability in regulatory and tax regimes. Investors, for their part, should plan on higher levels of market volatility resulting from regularly repeating spasms of intransigent conflict in D.C.

Obviously the budget is being used as a tool in a separate power struggle that's only abstractly related to the actual debt. All is fair in love and "war," and the very serious issues that underlie this struggle have a 0.000% chance of being resolved as this plays out. However, the odds are also 0.000% that the U.S. would miss an interest payment and/or default on principal payments for maturing notes. Anyone blowing out U.S. Treasuries on increased default risk is really making a political statement, not an economic one....890 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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