I realize that things are more than a little rough over at the BBC due to the job actions taking place. There is a certain irony in that their own problems have become one of their headlines; but at least it explains why some of the analysis programs I have heard over the last day have sounded like reruns (because they are). Still, someone should have been a bit more careful in filing the copy for the story about the debt ceiling deal that will be put to the vote in both Houses of Congress today. A report filed at 7:01 AM (Pacific Time) included the following sentence:
The markets responded to the breakthrough with relief. The Dow Jones index in New York gained nearly 1% soon after opening, following gains in Tokyo and London.
I have created a Yahoo! Finance Portfolio solely for the purpose of tracking indices. I just (7:18 AM) did a refresh, which revealed some problems with assessing “response” in a time of great volatility. The Asian indices (Hang Seng and Singapore, as well as Tokyo) do, indeed, look very positive. However, the FTSE 100 bump is only 0.02% up, which looks pretty feeble compared to the far more significant dives by the CAC 40 (-1.98%) and DAX (-1.60%). Meanwhile, the gain of the Dow may well have been premature. It is currently down (-0.29%) by an amount that is surprisingly close to the NASDAQ dip (-0.30%).
The four analysis paragraphs in a sidebar by Jane O’Brien (the latest fresh new face for American television viewers) makes it clear that the American economy is far from out of the woods. The Tea Party is likely to continue to be obstructionist on their rigid instruction-based ideological grounds, which means that the deal will only pass the House with sufficient Democratic support. Whether or not Nancy Pelosi will be able to deliver those votes will not be known until they are cast. Then there is the longer-term problem of the nation’s credit rating. Rating organizations, like Moody’s, are now under the gun for having been too generously optimistic a couple of years ago, thus contributing to the current economic crisis. They are going to have to be more serious about reality checking; and, whether or not this deal goes through, the whole process of negotiation says something about how effective the Federal Government is at making decisions in a time of crisis. Would you lend your money to such a government?