I was an original supporter of the Tea Party way back when it first started. Their message of a smaller government and lower taxes is what America needs in general. However, their ideals have been distorted into the mess we have now.
I don't care too much about the government shutdown beyond being able to shop at the Navy Exchange to buy a new Router. However, if it stretches beyond a few weeks it will get worse and worse on the economy.
"Both we and the consensus have had a baseline forecast that the
government shutdown will be too short to impact 4Q GDP growth," write
BAML economists Ethan Harris and Michael Hanson in a note to clients.
"However, with the shutdown approaching its one-week anniversary and
with both sides digging in their heels, that assumption is looking
increasingly untenable. Our forecast is quickly becoming a 'best-case
scenario'."
The shutdown on the other hand is nothing compare to not raising the debt ceiling by October 17th. That would be perhaps the worst economic disasters in modern times.
Failure by the world’s largest borrower to pay its debt -- unprecedented
in modern history -- will devastate stock markets from Brazil to
Zurich, halt a $5 trillion lending mechanism for investors who rely on
Treasuries, blow up borrowing costs for billions of people and
companies, ravage the dollar and throw the U.S. and world economies into
a recession that probably would become a depression. Among the dozens
of money managers, economists, bankers, traders and former government
officials interviewed for this story, few view a U.S. default as
anything but a financial apocalypse.
Lehman had only had $517 billion in debt. The Treasury market is $12 trillion and is collateral in millions of transactions all over the world. This is what happened when Lehman died:
The U.S. stock market lost almost half its value in the five months
following Lehman’s failure. The country had its worst recession since
the Great Depression (INDU), taking the global economy down with it.
Unemployment (USURTOT) surged to 10 percent, the highest in three
decades.
So it would be like 23 Lehman Brothers all died at once if we defaulted on our debt. This is all because some people from safe districts think they can run the entire House in order to stop a law that has already rolled out. Even if Congress passed an "Obamacare 100% de-funded bill" Obama would veto it and there is no way that veto would be overturned.
So the Tea Party is playing with economic catastrophe and the market losing half of its value for pretty much no reason. Their demands cannot be met and the market inches closer and closer to a steep sell-off as we get closer to Oct. 17th.
What would move that steep sell-off closer than Oct. 17th would be if China or Japan to lose confidence in Treasuries and start dumping them on the world market. That would shoot interest rates higher and hurt everyone that needs debt for any reason. Everyone from the guy trying to pay off a variable rate mortgage to a businessman trying to finance a new building will get smacked.
I just can't stand a party that would not blink if the entire US economy collapsed and took the world markets with it if they did not act. I don't know how bad Obamacare would be but the depression that would come out of the debt default would be far, far worse.
So that means that the Tea Party wants America to actively fail. They want to see everyone's portfolios cut in half and what is left of the recovery turn sour. If that is the case I think the Chamber of Commerce and any business groups that are left after the Default Apocalypse need to run their own pro-economy candidates against Tea Partiers. Put some pragmatists that can compromise into office in 2014.
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