From the New York Times “DealBook” Blog by Jason Eissenger:
Don’t look to a market panic to save us.
We are in upside-down world, where a freak-out now would help stave off financial devastation later. By staying cool, the markets are making a crisis more likely.
Sure, the stock market has ebbed lower, but it hasn’t plunged. Short-term bond markets have hiccupped. Spreads on United States credit default swaps have widened, indicating a slighter greater fear of default, but nothing drastic. The financial media keep grasping at any movement to demonstrate investors are worried. But market participants simply don’t think that the government will end up doing something so obviously reckless and harmful as refusing to pay its debts.
Wall Street’s lack of worry reflects cynicism about Washington (who doesn’t feel that?) but also a deep misreading of how significant the ideological fissures are in the capital. Wall Street is misunderstanding the extremism of the House Tea Party Republicans who precipitated the government shutdown and debt ceiling crisis.