7/30/2011

"Washington Is Annoyed at Wall Street's Failure to Panic"

Politicians in Washington are upset that financial markets aren't panicking. Possibly the politicians might realize that the markets aren't upset because they don't believe all the scare stories politicians use to worry many voters. From CNBC:

I just got off the phone with a source on Capitol Hill who has spent the past few days trying to convince Republicans to vote for a debt ceiling hike.

He told me that the biggest obstacle he faces has been "market complacency."

"Frankly, a bit of panic would be very helpful right now," he said.

As he explained it, lots of people in Washington, D.C. expected that this would be a week marked by panic in the markets. Stocks would tank. Bonds would get clobbered. The dollar would do something dramatic. And all of this would help convince reluctant lawmakers that they had to reach a compromise on the debt ceiling. . . .

Instead, the market has just been on a quiet, non-panicked slide.

Stocks have sold off by a couple of percentage points, but nothing that indicates a real fear trade in the works.

Everyone in D.C. has a theory about this. Some believe the market is sending a message that a deal will get done. Others think the market doesn't understand politics. . . .


Politicians might not want to believe it, but there is a third option. Politicians don't know what they are doing.

More on this belief that financial markets think that it is so crucial that a deal be made.

Republicans are losing support from some of their strongest backers and concede there must be some answers before financial markets open Monday, one day before threatened default. . . .

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