That’s Mayor Bloomberg of New York City talking, and if he’s talking I can only assume that his friends on Wall Street have asked him to go public:
WASHINGTON -(Dow Jones)- New York Mayor Michael Bloomberg Tuesday said political leaders in Washington shouldn’t tie an increase in the federal debt ceiling to a broader budget deal, warning that there could be “catastrophic” consequences if Congress misses an Aug. 2 deadline.
“America’s good name and credit are just too important to be held hostage to Washington gridlock,” Bloomberg said in a statement.
Bloomberg went on to say that the economy of New York City would be damaged by a failure to raise the federal debt ceiling, which is an understatement.
Why is the pressure from the financial industry on Congress and the President to raise the debt ceiling being ratcheted up now? Why are we hearing the sounds of panic from the head of the US Chamber of Commerce and Mayor Bloomberg. Supposedly we have until August 2, 2012 before we reach the ability fund the government. I suggest that the answer to that question doesn’t just relate to the inability of John “It’s not my problem” Boehner” to make a deal that his caucus will support:
“Where’s the President’s plan?” asked House Speaker John Boehner (R-OH) at a press stakeout after a GOP caucus meeting. “When’s he going to lay his cards on the table? This debt limit increase is his problem.”
He and other caucus leaders answered President Obama’s demand that the GOP figure out a way to raise the debt limit through 2012 by offering to toss non-starter Republican wish-list items back into the negotiating mix.
“Real controls like a Balanced Budget Amendment,” Boehner suggested, referring to a Republican-authored Constitutional ban on incurring budget deficits that would make raising taxes functionally impossible, and thus require filleting entitlement programs.
No, the reason the Street is getting more than anxious at the current state of affairs, and why Tom Donahue and Mayor Bloomberg are speaking out publicly probably has more to do with this deadline imposed by Moody’s warning issued earlier this month regarding the US debt:
<blockquoteMoody’s Investors Service said it will put the U.S. government’s Aaa credit rating under review for a downgrade unless there’s progress on increasing the debt limit by mid-July.
“The heightened polarization over the debt limit has increased the odds of a short-lived default,” New York-based Moody’s said in a statement today. “If this situation remains unchanged in coming weeks, Moody’s will place the rating under review.”
It’s 3 days from July 15th, which by my account is mid-July. No progress is being made that we know of, and Boehner is already looking like a rat that has chosen to abandon ship rather than the Speaker of the House, the second most powerful political figure in America.
If Moody’s downgrades the US credit rating on its debt as they said they would back on July 2nd, or even announces that they have taken the issue under review, I figure we are days away, not weeks, from a collapse of the stock markets, and the subsequent movement of capital into commodities like oil, gold, etc. or into other currencies other than the US dollar. Time to avoid a financial meltdown of unknown proportions is rapidly running out. Even the IMF Chief is running around with her hair on fire:
Christine Lagarde, the first woman to head the lending institution, said in an interview broadcast Sunday that it would cause interest rates to rise and stock markets to fall. That would threaten an important IMF goal, which is preserving stability in the world economy, she said. […]
“If you draw out the entire scenario of default, yes, of course, you have all of that — interest hikes, stock markets taking a huge hit and real nasty consequences, not just for the United States, but for the entire global economy, because the U.S. is such a big player and matters so much for other countries,” she said.
Really “nasty consequences.” That’s the IMF chief’s words, not mine. Still, I agree with her. I sure hope we are both wrong.