We've just concluded the "fiscal cliff" and now it's time for a new and exciting "crisis"! Hooray! How I love all this contrived nonsense. Will we default? Will the government shut down? Will the coming crisis be determined not by congressional vote but by a cage fight between Obama & Boehner? (Answers: No, Maybe, Hopefully).
Needless to say, in an effort to not get sucked into the kabuki theater that the US congress has become, I thought I'd lay out my predictions for the resulting deal, then immediately stop paying attention:
- No Default on Oustanding Debt: This is an obvious one. In order for us to default on our debt, the Treasury would have to purposely default. Why? Because our tax revenue is well in excess of what it costs to service our outstanding debt. The risk of default on outstanding treasuries is exactly 0 and anyone who says otherwise is wrong.
- Possible "Government Shutdown": Minor issue with some employees FERS contributions not being made. Since FERS consists of only federal debt, and no other assets, this development is meaningless for the same reason that I can't buy a Ferrari by borrowing against a portfolio of "mikesswimn" bonds.
- The "Sequester" is "Resolved": The sequestration and the resulting across the board spending cuts will be resolved magically. Republicans will show they're not total pushovers by enacting other "cuts" that really, are complete bullshit.
- Spending "Cuts" are Enacted: The resulting deal, which will happen exactly 2 days after the debt ceiling is reached, will consist of, let's say, $5 trillion in "spending cuts" and $500 billion in new revenue, along with $2 trillion in new stimulus spending over 10 years. The kicker for those of us who have been paying attention is that 60% of the spending cuts will be cuts that have long since been scheduled (you'll hear "war savings", "superstorm sandy savings/spending", or something along those lines) and the rest of the "cuts" will be merely replaced by the new approved "stimulus". Result: More taxes.... that's it.
- Moody's Downgrades USA: We'll end on another obvious one with Moody's downgrading the US after the "resolution" of the debt ceiling "crisis". Additional fun prediction, Moody's will write, unambiguously and very specifically, in their report that the reason for their downgrade was because of the lack of a credible plan to reduce the budget deficit. Yet, somehow, every talking head on TV will blame it on "brinkmanship" or, if you're watching MSNBC, the Republicans or the NRA or something equally stupid. Less likely, but still a plausible prediction, it will be found that the reason for this vast misunderstanding of the resulting downgrade is due to every cable tv pundit being functionally illiterate.
So fellow monkeys, what are your predictions? How do you think this charade will end up playing out? Does anyone out there think that something meaningful will happen? Also, how do you trade the coming downgrade from Moody's? Same situation with S&P's downgrade where it'll be met with significant drops in rates?