Wednesday, July 20, 2011

Economic Catastrophe Averted?

"Without immediate action to raise the debt ceiling, the government will be forced to delay payments on federal obligations we owe. This means failing to pay our troops, delaying Social Security checks and issuing IOU’s instead of Medicare payments to hospitals and doctors. Default would affect 70 million Americans. It sends a signal to the world that the Treasury bond is no longer the world’s most reliable investment — endangering the savings of every American."

"If we fail to raise the debt ceiling, the result will be an economic catastrophe."

News that US politicians are close to an agreement on the debt ceiling brings a sigh of relief to beleaguered markets. It is my opinion that a US debt default could result in disaster for the markets on the magnitude of the Leman Bros collapse.

Prudence dictated that I reduce exposure to equity markets until a resolution to the crisis was likely.  A resolution does indeed appear to be at hand. I will begin carefully adding back equity positions. A deal is not signed as of yet so prudence is still called for. Congress has bungled these type of things in the past, i.e., the delay of the passage of the TARP bill during the subprime meltdown.

This blog post does not constitute an offer of investment advice. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.

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