The answer I believe is, yes, absolutely. Frankly I think that some people in Washington were hoping for a crash before now.That they haven’t gotten one has lead to significant consternation.
Part of the reason why stocks haven’t plummeted is that despite the scare mongering coming from DC surrounding the debt ceiling, default is not on the table. Period. And sophisticated investors are increasingly aware of this.
The Treasury has the ability to prioritize payments to our creditors. We have plenty of revenue to take care of these obligations, plus Social Security, plus a host of other programs.
The only possible way we can default is if Jack Lew and the President don’t make the needed adjustments now.
“They feel that a severe market sell-off would be helpful to break the logjam,” said Greg Valliere, chief political strategist at Potomac Research Group in Washington. “It would be helpful in making the Republicans sue for peace. Obama and [Senate minority leader] Harry Reid believe that.”