Economic Collapse Narrowly Averted?

For the last several weeks, we have been hearing constantly that if the debt ceiling wasn’t raised, the result would be an economic calamity. A financial collapse. A great depression. Unimaginable havoc. The struggle over the debt limit was also presented as a nail-biter which could go either way. So, now that the deal is done and economic disaster has been avoided, investors should be ecstatic, right?

Yesterday the House passed the debt ceiling bill. The Dow dropped 11 points. Today the Senate voted to raise the debt ceiling, and President Obama signed the measure into law. The Dow dropped 265 points, closing below 12,000.

This can only mean one of two things (or both): either 1) there never was any economic calamity to be feared if the debt limit was not raised, or 2) essentially zero investors thought there was any chance the ceiling would not be increased. On any interpretation, key aspects of the media narrative of the last month or more were wrong.

Notice: All comments are subject to moderation. Our comments are intended to be a forum for civil discourse bearing on the subject under discussion. Commenters who stray beyond the bounds of civility or employ what we deem gratuitous vulgarity in a comment — including, but not limited to, “s***,” “f***,” “a*******,” or one of their many variants — will be banned without further notice in the sole discretion of the site moderator.

Responses