To the debt ceiling, and beyond!

Well, I'm getting that itch again, so, here goes.  I don't know how much of a prediction this is more than just a hypothetical extrapolation based on past events, but here goes.  

Think back to the fall of 2008.  Remember that "oh shit" feeling you had?  I think we're about to have another episode like that. 

In 2008, how much of that crisis was real vs manufactured?  I don't know, and I don't think it really matters.  There were and are very real and very serious structural issues in the way our societal/political/economic systems are set up, yet, I'm sure some of the 2008 crisis was manufactured, and that's what counts.  Never let a crisis go to waste, right?  Especially when you can create, or at least get positioned to steer a crisis to some pre-determined outcome. 

What came out of 2008?  In the heat of the moment decisions were made that successfully kicked the can down the road for about 3 years, til now.  The heat provided cover for some dubious at best decision making.  Now there is all this hub-bub about the debt ceiling, which is providing the right excuse for the right crisis at the right time.

I fully expect there to be some fireworks over the next couple of weeks, as well as the eventual "successful" handling of the crisis.  All the details are already known to the real players in this game.  Everything you see and hear on the evening news regarding the debt ceiling is nothing more than a high-brow reality TV show.  The only purpose these sound bites serve is to confuse and scare us.  

We've already seen Ben Bernanke saying one day that the Federal Reserve is open to more stimulus packages, and then the very next day saying they aren't prepared for that right now.  We've seen and heard lots of sound and fury coming from the politicians as well.  We hear about Moody's saying they might have to downgrade U.S. debt.  It's all a show.  

Now, assuming the goal is kicking the can again (and I do) and maintaining B.A.U. for awhile longer I can say

Moody's, or any ratings agency that matter to the U.S. will never downgrade the debt.

We will see weakness (or strength) based on the days debt shenanigan-talks, in the stock markets thanks to High Frequency Trading algorithms.  I generally expect weakness.  The rhetoric and play-acting coming out of DC will increase in intensity and direness in order to put a good dose of fear into the populace. 

Likewise, I expect to see a strong showing in the gold and silver markets based on the fear trade.

As the deadline approaches with no resolution in sight (or perhaps they will have a resolution, but the vote for it fails similarly to the first vote for TARP in 2008) I expect the stock markets to take a huge dump.  There has been a lot of testing of the HFT algos between the May 2010 flash crash and now, and I can see the NYSE stop trading for a time due to hitting a down circuit breaker.  If those algo's go a little nuts, it would be funny to see something like, DOW 100.  At least then people would see what a farce things have become.  But I don't expect that to happen for that same reason.  I also see gold and silver taking a beating due to margin calls, etc. at this point. 

Then we will see "marathon negotiations" and within 24 hours a "miraculous" agreement will be reached (one that is already decided on as of right now I'm quite sure).  At this point, the stock markets stabilize and get a small bump, but not recovering all that was lost.  Precious metals, which SHOULD now go up, will not. (Don't forget the goal is B.A.U. which means in part that the U.S. Dollar is king, and people who don't trust it - ie gold and silver bugs - are weirdos talking nonsense that should be shunned - the goal is to keep people in paper instruments that can be manipulated in a millisecond with a keystroke)

 Now with people sufficiently terrified, and markets stable but lower Bernanke has his cover for QE3, and gets to ride that bitch in like a white horse.  Of course there will be some delay to get here, but the stage is set again for the same shenanigan-cycle we've been thru since QE1. 

Whatever is in the legislation to pass this debt ceiling increase, rest assured, will be bad for you and me, and therefore will have an extremely pleasant sounding name.  Something like the "America's Fantastic Future Spending Bill"

The can will have been successfully kicked, again...for awhile.  I also fully expect the intervals between these crises to shorten.


Good luck out there, this ride is still just warming up.