Saturday, May 7, 2011

Black Swans Could Tip Debt Ceiling Brinksmanship Into Catastrophe

From Sarah Palin's smirky, contrived "Hells no," to smuggy Grover Norquist's budget-hostage style incremental debt ceiling hike proposal, the self-obsessed narcissists ruling the reality TV show called Our Federal Government all think the looming deadline to raise the nation's spending limit is just another opportunity to get lots of media face time before adoring sycophants.

It is not. Should lawmakers fail to raise the $14 trillion debt ceiling, the US Government would not be able to fund operations, and could begin defaulting on maturing debt, setting off a catastrophic cascade failure throughout the bond markets.

Part of the problem is that Treasury Secretary Tim Geithner said the US would hit its current credit limit May 16, and really, really bad things would start happening around July 8. All the media-mad politicos scrambled to figure out exactly how many cameras they could thrust their mugs in front of in those intervening eight weeks. All those shameless self-promoters with visions of godhood scampered from hair stylist to tanning salon to maybe a quick nip-and-tuck for getting as much face time as possible pontificating on the greatness of their visionary posturing.

Republicans are virtually jumping up and down at the prospect of bringing the world to the brink of economic annihilation. They are elated at all the attention, all the fawning their position gives them. They could make President Barack Obama, the leader of the Free World, along with the rest of the Free World, and the not-so-free world at that, grovel and beg and plead to placate their fabulous Republicaness. The self-worshipping frat boys and sorority sisters who comprise the GOP caucuses nowadays cannot imagine there might be real world consequences and that the whole debt ceiling issue is not all just about their fabulous selves.

After May 16, Geithner will have to start all sorts of very creative - and risky - account juggling to keep the government running until his July 8 deadline. Former Treasury Secretary Paul O'Neill, who knows a thing or two about Republicans as he was in George W. Bush's administration, figures Geithner shouldn't have given Congress such a soft deadline. Too much temptation to mug for the cameras while ignoring a very, very real problem.

O'Neill famously likened anyone entertaining notions of not raising the debt ceiling with al-Qaeda terrorists. Even the Republicans' plutocrat overlords in the US Chamber of Commerce, the National Association of Wholesale Distributors and the National Association of Manufacturers have been calling Tea Party Republicans to urge a hike in the ceiling.

But all the attention has just given the ego maniacs an amphetamine-like boost to stratospheric self-idolizing delusion. Republicans have determined they would demand all sorts of budget-slashing, Medicare-busting, Social Security-plundering concessions for raising the debt ceiling, not because they care about budget shortfalls and debt, but because they want to make a President and a whole world dance to whatever tune they call for.

All of this is very unfortunate, as once Tim Geithner has to start juggling account books May 16, any unforeseen hiccup anywhere in the world could trigger a catastrophic cascade of tumbling markets and financiers throwing themselves from high places. Any piddling bank failure in Ulan Bator, any errant flamethrower in a Middle East oil producer, any butterfly flapping its wings in the wrong neck of the wrong woods could trigger a series of escalating crises a global financial market limping along with it's biggest economy hobbled by a nagging groin pull won't be able to shrug off.

Nassim Taleb called the occurrence of extraordinarily unlikely but seismic events "Black Swans." Europeans once thought all swans were white, and based all sorts of notions on that assumption, until the 1697 discovery of black swans in Australia messed up everyone's day.

Should lawmakers fail to raise the debt ceiling and Tim Geithner start to toss account books into the air, it could set up all manner of unknown gnomes to mess up everyone's day once again.

Republicans, and some Democrats, who think the debt ceiling show is just another venue to prance their ideological prancing before adoring fans either haven't the vaguest notion or couldn't care less that their ego masturbations could cause havoc in the bond markets and trigger global credit freezes that would grind commerce to a halt. Republican legislators chose posturing over action in 2008, and the Dow Jones Industrial Average dropped 777 points in a matter of hours, plunging the world into an economic maelstrom it hasn't climbed out of yet.

Should lawmakers fail to act on the debt ceiling, the resulting catastrophe would make 2008 look like a quick grope in the back seat of a '67 Chevy: risque for its day, but no big deal.

Hopefully, the recalcitrant lawmakers will get a visit from Luca Brasi carrying a severed horse's head wrapped in a sheet.

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