Shadow Banking and the Repo Market

[Crewleader]

Weekend Edition
July 29 - 31, 2011

Debt Ceiling Doomsday

Shadow Banking and the Repo Market

By MIKE WHITNEY

]i\ "International markets are absolutely on tenterhooks, because up until now there really has been a pretty blithe assumption that sooner or later politicians would strike a deal, and it would probably be last-minute, but a deal would be done before Aug. 2.

What is really starting to think in right now is that not only is there a growing risk the rating agencies could downgrade U.S. debt, even if there is some kind of short-term Band-Aid solution, but secondly there may not even be a deal by August the 2nd. And so a lot of people in the financial markets right now are starting to look at what-if scenarios and creating plans for what they half-jokingly call doom day, potential -- or D-day, potential default day."

-- Gillian Tett, editor Financial Times, PBS Newshour

Okay, so we all knew that the cultists and screwballs who run the GOP were going to take this to the 11th hour, right? But who knew that once they got us out on the ledge, they wouldn't know how to cut a deal? Instead, Tea Party confederates seem determined to make sure the US plunges into the abyss. They want to add a balanced budget amendment to the current legislation which has no chance of getting it passed. President Barack Obama has already promised to veto the bill.

So, here we are, just 4 days away from the August 2 deadline, and no closer to a budget agreement than we were two months ago when this whole fiasco started. Only now, Wall Street is worried, the public is pissed off, and anyone holding US Treasuries around the world is starting to rethink their portfolio. On top of that, the markets have been pounded for 4 days straight, futures are falling like a stone, and the economic data is getting weaker and weaker all the time. (BEA reports that 2nd Quarter GDP came in at an anemic 1.3%) The last thing the country needs is another crisis to send the economy sprawling back into recession. Here's a clip from an article in the Financial Times:

http://www.counterpunch.org/whitney07292011.html

[enough]

1. k&r (nt)