below is something I recently posted to my blog. Though I'd share it with y'all and solicit your opinions on the matter.
"Mainstream media hysterics would lead the average American spectator to believe that the US economy is dancing on the precipice of disaster. Without a doubt, America's great wall of debt is a serious long term problem. Nonetheless, financial news hype notwithstanding, the marketplace shows little indication that the global economy is careening toward imminent catastrophe. Decisively pushing yields on the 10 year treasury note to a 6 month low on Friday, treasury investors have effectively shrugged off the prospect of a default on interest payments on US debt. Treasury bullishness is often suggestive of economic headwinds, but the trend certainly invalidates the widely heralded notion that investors are preparing to dump treasuries or else demand significantly higher interest rates on US debt. Meanwhile, major US stock indices continue to hold support, and though the VIX spiked into the end of last week, VIX futures contracts fell Friday, indicating that market participants grew less fearful of a protracted down move in stocks despite the hoopla on Capitol Hill. Finally, to my knowledge nothing systemic and exceptionally new or unusual has taken root in the foreign exchange market since the debt ceiling emerged as national priority numero uno. The dollar has been declining against most major currencies for the majority of the past decade, and this is a trend that is highly likely persist for the foreseeable future irrespective of the outcome of current debt negotiations.
In light of prevailing market conditions, my take is as follows: market players are expecting a resolution to the current impasse, whether by congressional decree or by executive pro-action. In the unlikely event of a partial default, investors are counting on the treasury department to continue servicing debt payments and are expecting the FED to beef up expansionary monetary policy to prevent deflation stemming from a sharp drop in government outlays. Such anticipation may even help to explain recent treasury bullishness. Perhaps it is partially a recognition of the potential for another round of FED buybacks of long term government debt in response to a partial US default that's got investors bidding up treasuries.
For now, all remains quiet on the western front. The debt dragon lurks noisily in the trenches but has yet to rear its fangs. I'm quite confident that this most recent media shit storm will soon pass. By fall, and likely much earlier, safely count on the news cycle migrating to greener pastures. It's about time the burgeoning EU sovereign debt crisis and the stalling US recovery, two legitimate emerging crises, took there deserved return to the front and center of the media spotlight."