Debt Ceiling Debate: Does Wall Street Believe the U.S. Could Default?

Debt Ceiling Debate: Does Wall Street Believe the U.S. Could Default? · Daily Ticker

Stock markets opened lower this morning as week two of the shutdown begins and more attention turns to the debt ceiling talks, or lack thereof.

Treasury Secretary Jack Lew raised the alarm about the potential impact if the government doesn't raise the debt ceiling on the Sunday morning talk show circuit.

Related: Here's How to Bypass the Debt Limit

“We’ve never gotten to the point where the United States government has operated without the ability to borrow. It’s very dangerous. It’s reckless, because the reality is, there are no good choices if we run out of borrowing capacity and we run out of cash. It will mean that the United States, for the first time since 1789, would be not paying its bills, hurting the full faith and credit, because of a political decision,” Lew said on CNN’s State of the Union.

Yahoo Finance senior columnist Mike Santoli says: "There's anxiety in the market...but not necessarily something that rises to the level of 'the market is throwing a tantrum' and therefore it's going to get some sort of reaction."

So why is this market situation so calm and collected -- comparatively -- and so different than 2011 when the U.S. credit rating was downgraded by S&P? For one, Europe's financial crisis is mostly in the rearview mirror. There also seems to be a continuing sense on Wall Street that the political posturing will end before a real debt crisis begins.

That said, Aaron Task points out that credit default swaps on government debt are priced higher today than in 2011. Is it a sign of real worry among investors?

"Somebody is buying a lottery ticket they think somebody else will buy from them at a little higher price," says Santoli. "It's registering some anxiety that ultimately this really could go in the worst possible way."

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