I have a few questions for the GOP and their followers.
When has a tax cut created jobs, and when has a tax increase killed them?
When you force the government into a budget lock, and there are TRILLIONS of dollars held by private citizens, what do you think the markets are going to do when people can't cash that paper?
When the securities industry downgrades the rating of that paper, and the Social Security Administration is forced to sell it because it can't hold it (by law) what will happen? That's more that a trillion dollars hitting the bond market in one shot.
There will not be a deal on the debt ceiling. John Boehner doesn't have control over his own party in the house, and no one can control people like Rand Paul who can block everything in the Senate, so this is dead and buried. That said, here are my expectations for the next few weeks.
The Dow is currently around 12,6-7. By Thursday it will be around 11,2 and Friday, as people look forward to the week to come, with still no deal in sight, the wheels will come all the way off. By 10:30 Friday morning it will have dropped 500 points, triggering the safety system, giving about a 10-15 minute break, then it will continue to plummet dropping another 1000 or more as people try to get out and protect their money. The problem is, the normal fallbacks will fail. The bond market will be crashing even harder and faster, no one wants to hold them when they can't be liquidated, so that will make a run on precious metals.
Over the weekend, the GOP and Fox will be blaming the Democrats for not listening to them (that part is true, they're not listening, but they shouldn't be) and the Democrats will be blaming the Republicans for blocking everything and driving the country off a cliff (also entirely true).
Black Monday. The markets open and everyone wants out. They don't want to trade, they want cash. Everyone is selling, no one is buying, and the markets close at noon having lost another 2000 points. Full scale panic. People are debating if they should stay closed on Tuesday.
Black Tuesday. 1-800-RUN takes over. The markets are not going to open until 10am after the debacle the day before and some of the hardest hit are the banks. They're all players in the financial markets, so they took an absolute beating on Friday and Monday, and people who don't pay attention and just caught this coming home from work Monday night all stop by the bank to get out some cash. Except the ATMs are all empty and the tellers don't have any either. Bank of America, never the most stable institution, calls the FDIC for help.
Which is too bad, because BoA is bigger than the FDIC, and before they can even cover BoA, the FDIC is wiped out. Now the panic is real. The biggest bank in the country, maybe the world, just went belly up. The panic spreads to other banks and like a cascade of dominoes, banks nationwide close their doors.
Tuesday night on the talking box, everyone is collectively crapping their pants. No one knows what's going on, over on Fox News, they're still blaming the Democrats and still talking about getting a debt ceiling deal done if the White House just does what they're asking. Over on CNN, they're showing pictures from Atlanta of a supermarket on fire after things got out of hand. MSNBC is showing the same thing from a Wal-Mart in Kansas City, but that one isn't on fire, it was a shootout because someone thought conceal-carry was a good idea, and since everyone is scared, everyone with the ability to carry, was. When the first person flew off the handle and pulled his gun, so did everyone else.
Bloody Wednesday. After the disasters the day before, there's a new run. Not on the banks, they're still closed, and not on the stock market, that's flushed and gone down the sewer, the guys at Goldman Sachs looking around wondering what the hell happened, but everyone's IRA and 401k just went up in smoke (not theirs, they made money on every sale). Wednesday, the run is at the grocery stores. People are trying to stock up, but like the day before, in too many places, things get weird. LA, Detroit, Memphis and Philadelphia burn after arguments turn to fights then brawls then full blown riots. There are similar stories coast to coast. At the close of business, most stores are bare. The President says he'll address the country Thursday but it's far too late. The banks are done, the stores are empty, the markets are toast, the economy worldwide is in complete free fall, and no one has a parachute.
It's 1929, only worse. 78 years ago, there wasn't a "technology industry" that completely depends on things working in other areas. When all of those lock up, that whole world closes. I might be off by two weeks, when there isn't a deal and the SSA forced bond sale makes it all happen, but there's your destination.