Like most sequels, Debt Ceiling Crisis II isn’t nearly as interesting as the original, and many will argue in the coming days that the 2013 release is far less scary than the 2011 original.
For starters, virtually no one can fathom an actual rendezvous with default, and with good reason.
But that doesn’t mean we’re not worse off than we were back in the summer of 2011, when the debt can was kicked down the road to another odd-numbered non-election year.
In fact, the very absence of alarm itself is cause for concern.
Standard & Poor’s, which finally found a bubble that it could identify and articulate, sent world markets into spasms two years ago with its downgrade of Uncle Sam’s IOUs.
The Dow languished around 11,000, well off the records it had set four years earlier. The threat of a double-dip recession hung in the air, amid questions about whether the Great One had even ended.
Now, some $2.4 trillion in spending later, how far have we come?
Well, the Dow has vaulted ahead by 3,800 points, or 33 percent, since the 2011 debt-ceiling debacle, while interest rates have remained rock-solid low. The 10-year Treasury, which yielded about 2.6 percent in July of 2011, returns an almost identical rate today despite the flood of new borrowing — courtesy of the Fed’s bond-buying spree.
Meanwhile, the companies that make a living trafficking in government paper, the big Wall Street bond houses like Citi and Goldman, have set record highs.
But where has the $85 billion a month in spending really gotten us since August 2011?
As ace economist Lacy Hunt of Hoisington Investment Management notes, “It is often said that economic conditions would have been much worse if the government had not run massive budget deficits and the Fed had not implemented extraordinary policies. This whole premise is wrong.”
So. Two years and more than $2 trillion in spending later, growth is stagnant; ratings agencies have been silenced; and no one in Washington, or on Wall Street or Main Street seems the least bit concerned. As with the housing bubble, the signs are all there, but the party goes on.
Until one day it doesn’t.