The debt ceiling debate now disappears until the winter of 2012. Thankfully, the only bricks left to build the rising wall of worry for the market are European sovereign debt, European economic contraction, Chinese economic contraction, Brazilian economic contraction, U.S. economic contraction, rising commodity prices, potential inflation, the economic stress on the states as the federal money spigot closes, and the possibility or not of the Fed opening the door to more quantitative easing …
In truth, as potentially dangerous as the above are, none is as dangerous to global markets as was the specter of a U.S. default on its debt, or, in lieu of that, a prioritization of payments on its other obligations.
Personally, I am happy that I can focus on other issues, but as I leave the debt-ceiling topic for now, I give you a reader’s thoughts on the issue. Frankly, I like what he has to say, as it implies a private-sector solution to a government problem. As you read it, think about whether any business could have or would have purposely threatened collapse to achieve a solution to its fiscal problems. As well, think about what would happen to the employees responsible if a business did behave that way.
Senators and Representatives have raised the total debt ceiling every year for the last 17 years. Do you think they should show the way and accept a 25% pay and a 25 % expenses and allowances cut to show what can be done?
Not only do I think U.S. politicians should voluntarily cut their pay as a model for deficit reduction, I think they should lose the right to raise their own pay and, as well, their pay should be tied to the health of the U.S. economic/budget reality. If unemployment is goes up, their pay goes down, and if the budget deficit exceeds a certain percentage, their pay goes down. In healthy economic times, and when the budget is close to balanced, their pay goes back up. Simplistic, true, but I like the idea of those responsible for sensible economic/fiscal policies held accountable for the choices they make.
Today is closure for me, and I thank you for reading my expressions of fear and worry about the trauma we have all just passed through. The fact is that no matter how much one knows, or understands, or what one thinks he or she knows or understands, fear is a powerful emotion that can find its way in no matter what protection you put up. Fear is like intense cold. You can layer on clothes to keep you warm, but the cold continually presses against you, looking for any chink, any opening through which it can seep in, and it will.
The global economy has some strong headwinds, no doubt about it. These headwinds are all part of an economic reality, a natural flow of money in a commercial environment. Eventually, the cycle will change as the flow of money changes. The market understands this. The debt-ceiling crisis was not natural; it was manmade for political purposes, and it disrupted the natural flow. It is gone for now, so maybe the economic cycle can resume and the market will respond naturally.
Trade in the day – Invest in your life …
