Off the Cuff: The US Debt Ceiling Drama Will End with a Whimper; the EU Credit Crisis with a Bang

Off the Cuff with Mish & Chris is back!

In this week’s podcast, Chris and Mish tackle:

• Debt Ceiling Thrash: All the current brinksmanship is just theatre: A deal will be done. None of the plans on the table – including whatever will be agreed to – has any real viability. The final deal will be a “limp-ahead” solution designed to kick the can down the road a year or two, and it will be full of fantasy projections and back-ended cuts, designed more to please the financial markets than the populace.
• The implications of a US default: A true default is VERY unlikely. It would be a true disaster if it happened, which is why all parties are motivated to avoid it at all cost. While austerity is sorely needed, it’s unlikely that the markets (e.g., bond vigilantes) will force any anytime soon, due to the strong intervention of central planners.
• Europe: Europe is in a much different situation, and much more precarious than the US at present (mostly because the ECB has no taxing authority). The bond buyers are already in revolt in the credit markets for several countries, and they are now targeting the bigger players (Spain and Italy), which is injecting real fear. Expect increased austerity to be forced across all of Europe.

Adam Taggart July 28, 2011

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