Will the U.S. Default?

August 2 is debt limit d-day for the financial markets; and, from all outward appearances, the markets seem to be ignoring it. After being down several weeks in a row, stocks have snapped back sharply. Investors are focused more on some signs of economic recovery and expect a good earnings season.

DIY Investor attributes the seeming lack of interest on the part of markets to the assumption that Congress will overcome its typical stupidity and pass the debt ceiling. But pushing to the edge can be dangerous. Once the ground gives way, there can be a scramble to regain footing.

DIY Investor also assumes passage, but in the back of his mind there is that low whisper of "what if."

Sadly, it isn't clear if anything was learned from the 2008/early 2009 debacle. Do politicians realize how close the economic system came to going over the edge as they bickered over the stimulus package?  Do politicians remember the fears before the announcement that money fund balances would be guaranteed? Do any of them wonder what would have happened if money fund withdrawals had reached  a tipping point?

As with the 2008 housing crisis, there is no one that most people can point to as the "cause" (in my mind, though, there is no question - it was caused by Greenspan); and this is a big part of the problem.  All of the big spenders rant and rave about Congress being out of control, and it makes great sound bites; but, in the end, they'll point to others when the economic impact is felt.

DIY Investor will make a personal commitment to vote across the board against incumbents if this goes to the last minute before passage. Politicians need to grow up, put their personal vote garnering actions aside, and pass the debt limit. Next they need to get about the business of cutting spending and raising revenues and putting the finances of the country on solid ground.

Anything less and they need to be replaced - wholesale, IMHO.