debt ceiling clown show work around - different from 2008

The Debt Ceiling Intelligence Test for the Wall Street Boys by Dean Baker

This is an interesting scenario. On the other hand, it is interesting to look at the fundamentals here. The vast majority of bonds that might be used as collateral will not have defaulted. Even the ones that are technically in default will have only lost a small fraction of their value. Think it through. You have a government bond that was supposed to have a coupon payment on October 17th which was not made because of the debt ceiling standoff. How much less are you willing to sell this bond for on October 18th? (If you say 3 percent or more, send me a note.)

While this set of events could possibly undermine the system as it functions today, if the bankers could not develop a workaround pretty quickly, they are a lot dumber than people give them credit for. Remember, this situation is fundamentally different than what we saw in 2008. In 2008 there was trillions of dollars worth of genuinely bad collateral tied to defaulting mortgages, which were in turned tied to houses that had lost much of their value. This was a case where the music stopped and the money really wasn't there. In the current situation, does anyone really doubt that at some point the government will make the interest and principle payments on its debt?

None of this is to dispute that Lowrey's scenario of a financial crisis may not be right. The Wall Street boys really don't seem to be very good with numbers. Put to the test, they may well fail.