The tea party is in favor of voting down an increase to the debt ceiling, which would place the US in technical default on its debt obligations. The right wing is licking its chops, waiting to chop all those social programs for all those nasty liberals. And Dick Armey is opposed to that?
Actually, the folks that would probably be hurt the most are the banksters. Why? After the fold.
U.S. Treasuries have historically been considered risk free. The 'float' (depth and breadth of issues) is by far the largest in the world.
That's why U.S. Treasuries are used almost exclusively in creating hedged transactions, in particular interest rate swaps which are by far the largest component of derivatives trading. How big?
From wiki
According to the Bank for International Settlements, the total outstanding notional amount is US$684 trillion (as of June 2008).[7] Of this total notional amount, 67% are interest rate contracts, 8% are credit default swaps (CDS), 9% are foreign exchange contracts, 2% are commodity contracts, 1% are equity contracts, and 12% are other. Because OTC derivatives are not traded on an exchange, there is no central counter-party. Therefore, they are subject to counter-party risk, like an ordinary contract, since each counter-party relies on the other to perform.
All the huge numbers associated with derivatives trading activities reflect what is termed notional amounts. The banks hedge certain risks by either buying or selling treasury portfolios that behave in a manner opposite of the risk the bank's client wants to lay off. Essentially 'creating' the opposite bet. A sophisticated form of bookmaking.
There's one little problem for the banks as the right wing extols the virtues of not raising the debt ceiling and forcing the US into technical default.
You can't create OTC derivatives without the ability to buy and sell risk free securities.
And what happens to all those existing positions if the US goes into technical default? Good question.
The availability of US risk free securities and the potential impact on the banking system has come up before, only in a much different context.
Back in 2000, President Clinton announced that The United States is on course to eliminate its public debt within the next decade. Read this post and weep about how G W Bush totally screwed our economy with two 'off the books' wars, the tax cuts for those who did not need them, the medicare drug plan for big pharma, etc. LINK
The banks were then also faced with the prospect of decreasing availability of risk free securities, which would have been a huge problem affecting derivatives trading. Didn't happen, but for all the wrong reasons.
When a right wing puppet like Dick Armey advocating raising the debt ceiling, you can be sure the banksters are pulling his strings.
If I were a Democrat, I'd think twice about caving to the tea party on this issue. I think the banksters will force the tea party to back down.