In fact, it's just beginning.
Those of us who have been around a while may remember Bonddad and New Deal Democrat. They started their own blog a while ago, and are now live-blogging the financial sector's reaction to the possible default. So far, we have this dire note:
Marketwatch at 8:01 CDT: "[C]learing banks are unwilling to finance paper that matures by the end of year, causing a fairly chaotic environment," said Thomas di Galoma, co-head of fixed-income rates trading at ED&F Man Capital Markets, in a note.
What does this mean? Follow me over the Orange FSM.....
Bonddad explains that it has to do with so-called repo loans, a very common type of exchange between banks that basically keeps the entire financial sector going. And:
Here's the rub: this transaction which is incredibly common and a bedrock of modern treasury management requires a "riskless" security to perform. Enter the T-Bill which is backed by the full faith and credit of the US government. The T-Bill makes this a routine and standard transaction. But remove the riskless nature of the T-Bill and you've got big problems in the financial world as this market grinds to a halt, making short-term lending impossible. That completely cripples trade and commerce, and that is why this situation is so deadly.
So, in fact, the worst case scenario, a complete failure of the banks to move money and conduct their usual transactions, is already happening to the world economy. It's the economic equivalent to the heart stopping. And the longer it continues, the worse the damage. Even a short stoppage like the one we're experiencing now could have drastic consequences.
Keep in mind, also, that the best solution out there just kicks the can down the road for a few months. Which means we get to do this all over again later.
All because the Tea Party wanted to defund Obamacare.
I hope some of y'all in deep blue districts head out to the purple districts to un-elect moderate Republicans in 2014. That's the only way this ends - by ending the Republican majority in the House.