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Shutdown Watch, Day 10: Let's Default Around Thanksgiving Edition

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Maybe John Boehner does have the votes for a clean debt-ceiling bill—at least one that could give a whole new meaning to the term "Black Friday."

House Republicans, looking for a way out of a budget standoff they began, will offer to President Obama at a White House meeting Thursday a plan to increase the debt limit through Nov. 22, in exchange for a promise to negotiate a deal for long-term deficit reduction and a tax overhaul.

The debt ceiling increase could come to a vote as soon as Friday, but House Republicans did not intend to reopen the government, hoping that the shuttering of federal programs would keep the pressure on Democrats to compromise….

The White House press secretary, Jay Carney, declined to say whether Mr. Obama would sign a short-term debt limit increase, as the president suggested he would earlier this week. “We’ll see what the House Republicans propose, we’ll see what they’re able to pass,” Mr. Carney said.

So, in all likelihood: Hooray! No history-making default this month! And just in time, because some people were starting to get nervous, not that you could tell that a potential economic Armageddon was on the horizon from looking at the markets.

Despite some modest wobbles, investors are by and large sanguine about the U.S. government shutdown and the threat of a U.S. government default. Pundits and foreign policy makers, on the other hand, seem to be taking the situation much more seriously.

Take Chinese Vice Finance Minister Zhu Guangyao warning Monday that failure by the U.S. to raise its debt ceiling would have global ramifications….

China’s nervousness is reflected in the HKFE Clearing Corporation’s decision this week to lift the haircut it requires on U.S. Treasury bills held as margin for maturities of less than one year to 3% from 1%. On the face of it that doesn’t seem much. But U.S. Treasury bills ought to be the safest of safe assets. Trebling the haircut on this sort of collateral sends a pretty strong signal.

Fidelity, for one, is not going to be caught with its pants down should something else go wrong.

Fidelity Investments, the nation's largest money market mutual fund manager, has sold all of its short-term U.S. government debt — the latest sign that investors are increasingly nervous about the possibility of a government default….

Prior said that Fidelity no longer holds any U.S. debt that comes due in late October or early November, the window considered by many investors to be the most exposed if the government runs out of money to pay its debts.

Oh yea, and jobless claims are up—and the White House is weighing in on whose at fault. Here's a hint: It's not California and its little backlog glitch.

"It's one week's number, the numbers are noisy, but it's yet another signal" about how employers are reacting to the fiscal deadlock in Washington, Furman said at a breakfast sponsored by the Center for American Progress.

G.O.P. to Offer Short-Term Debt Limit Plan to Obama [NYT]
Foreigners Fear U.S. Default. Markets Don't [WSJ MoneyBeat blog]
Fidelity sheds government bonds coming due [AP via USA Today]
U.S. jobless claims at six-month high [Reuters]
Obama aide: jobless claims jump likely shows shutdown effect [Reuters]