As I write this, the House is considering a proposal that would end the shutdown and raise the debt ceiling, yet news continues to emerge that even at the moment there may not be enough votes to pass, even with all Democrats voting in favor. Then the bill, if passed, would go onto the Senate, where several Tea-Party affiliated senators have not indicated whether they plan to filibuster the bill, or try to push through a series of doomed amendments.
I have a creeping sense that there are some on the R side of the ledger who want to call the President's bluff on the 17 October "default" deadline. It isn't a real deadline, and the Federal government would still be able to pay its bills for at least a week on the basis of its daily cash flow. Thus if midnight passes without an agreement and the markets don't collapse today or tomorrow, the administration will have lost a great deal of creditability. Now, the markets would eventually react, probably on Friday or next week, with a sizable, but not catastrophic sell-off, but the damage might be temporary. With nowhere else safe to go, investors will probably sit and hope for a solution. The fly in the ointment might be foreign holders of short-tern treasuries, who might dump them.
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