With Fed tapering on hold for another month, what's the next hurdle for the US economy to clear? US economic news has slowly but surely been improving, with no glaring weaknesses over which to be concerned. So of course, it's time for the politicians to mess things up. In the next few weeks, the US will hit its so-called debt ceiling unless Congress votes to raise it. If the government reaches its borrowing limit, it will force many non-vital government offices to shut down. Plus, it could result in rating agencies lowering the credit rating on US Treasuries. It will almost certainly roil the financial markets as well. Because Republicans are planning on including a clause which defunds Obamacare in exchange for a debt-ceiling increase, a major showdown is nearly inevitable in Washington. Stay tuned.
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Markets may not buy into it right away, but the danger is real. Obama won't give any ground on his one true accomplishment (universal healthcare) and Republicans have nothing left to lose. If multiple government operations do shut down, it could have a very adverse effect on the US economy - which is precisely what the country does not need right now.
Jay what are your thoughts on how this will play out? Are we likely to see similar gamesmanship as per previous situations? I get the feeling markets may not buy into the positioning as much this time around.