Why Would Markets Be Hurt If No Deal By August 2nd?

Liberals are still out there fear mongering about how, come August 2nd, the financial markets will be sent into chaos if there is no deal on allowing the debt ceiling to be increased.  What they mean, of course is that if Obama, Reid and Pelosi are not allow to continue to recklessly spend more money than America collects in revenue, everything will go to Hell in a hand basket.

But honestly, why would the markets react in such a way?  Of course  no one can really predict how the markets will react if the debt ceiling is foolishly raised.  There are a lot of irrational people out there who believe that if government is not allowed to keep up deficit spending that the American economy is doomed.  These people might very well throw the markets into chaos because of their lack of understanding of basic economics.  Many on Wall Street, after all, have been donating to President Obama’s reelection bid.

Hey, like a wise man once said, you can’t fix stupid.

But the reality is that if there is no deal by August 2nd or if there is a deal which does not raise the debt ceiling, forcing President Obama to spend not a dime more than we collect in revenues, the markets should rejoice.  They should be glad to see that for once in a long while the rampant printing of worthless, inflationary dollars will not be a drag on the economy.  They should be happy to realize that as government is forced to cut back its check writing spree, revenues from companies will reflect their true revenues in the free market and not include any amount of free dollars thrown their way by Washington politicians.

If the logical people outweigh the illogical people the markets would head higher, if anything.  But sadly there are a lot of people who are just plain stupid.  And another old saying sums up the fears we should all have; never underestimate the stupidity of people in large groups.  Especially when there are a lot of stupid people who are stupid singularly among that group.