Zero Hedge Props: Debt Ceiling Crisis Just Before US Election?
We have to give Zero Hedge all of the credit for the following analysis. Tyler identified that the US will have about $16.333 trillion in debt by September of 2012. The President has only been afforded $16.394 trillion in the automatic debt ceiling provisions from last summer. So, what Tyler pointed out was very interesting: the GOP helped rush through some spending bills that would give the President a near-term win of sorts – but add another $133 billion in debt (to all but ensure that he faces a debt ceiling crisis by September). With that coming just two months before the election – it will give the Republicans a lot of fodder for the campaign trail.
Remember what happened to the stock market and the global economy as it trembled in August over the prospect of a US default? Imagine the headlines going into September when the GOP can stand up and say that it has given the President ‘all of the leeway he wanted’ to turn the economy around – and he ‘still put the US in another critically dangerous default risk’. That will be the play. Leading up to that point, there will be a wave of ratings agency warnings and increases in the risk outlook for theUS. It’s a dangerous game, but the stakes are unusually high.
There are a number of analysts that we talk with that believe we will see a series of events that will help to more critically push the outcome of the election in one direction or another – much more so than where we sit today. It could be any number of things: a surprisingly strong recovery in the economy (could happen ifEurope seems to “right itself” and move into a positive direction in the 2H of 2012). All countries contingent upon a strongEurope would then start to move, corporations would free up a lot of the $2 trillion in cash they are sitting on today, and the global economy would be in a different position at that time.
On a negative basis however, we could see another war open up inIran, a crisis across several nations that are key oil producers that would push crude oil prices to the $150-$200 per barrel range. There is also the potential for significant defaults in Europe still, starting withGreeceand moving toItaly,Spain, andPortugal. That would send economic conditions into a tailspin in the second half of the year.
Lastly, we can’t discount the fact that the Republicans and Democrats will be using some of the top political strategists in the world for the rest of the year to try and put their candidate in the best position to win the November election. We don’t believe they will sacrifice the country to get their candidate into office (or maintain control of their Congressional houses), but they might be willing to put just a little pain into elements of the country to sway opinion. It will get interesting over the next eight months.
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