How and Why the US Could Default

Phoenix Capital Research's picture



Having gotten through the fiscal cliff debacle by the skin of its teeth (somehow passing a deal that both raises taxes AND the deficit), the US political class is now playing chicken with the debt ceiling.


The media, as it likes to do, continues to rave about social issues (gun control being the latest), ignoring the fact that the US would be in technical default already if Treasury Secretary Tim Geithner hadn’t already raided various funds for some $200 billion.


We’re not here to debate social issues, but it’s telling that a US default, something that would affect every American, gets less airtime than assault rifles, which affect less than 5% of the population.


The market, is already giving us hints of what the likely outcome will be. Despite start of the year buying and a seasonal bias, the rallies of the last few days have been very weak, usually peaking out mid-day and then retreating.


More telling however is the big picture view of the S&P 500 where it is tracing out virtually the exact same pattern as it staged going into the failed debt ceiling talks of 2011.


Here’s the S&P 500’s recent action:



Here’s the market action going into the 2011 debt ceiling debacle:



Here’s what followed:



History doesn’t necessarily repeat, but it often rhymes. And the fiscal cliff situation has made it clear that when it comes to issues such as cutting the deficit and debt, US politicians are totally clueless. Remember, Congress hasn't passed a budget in four years, which incidentally goes a long ways towards explaining why we're about to breach the debt ceiling again. The notion that these folks are somehow going to "get religion" about the debt situation will very likely prove to be as misguided as the hope that the fiscal cliff deal would do anything to help the economy.


On that note, we’ve recently prepared a Free Special Report outlining how to prepare for this as well as the coming economic collapse. It’s called: Preparing Your Portfolio For Obama’s Economic Nightmare and it outlines several investments that will profit from Obama and Congress’ misguided economic policies, including one targeted at potentially huge returns when the US breaks through its debt ceiling again.


You can pick up your FREE copy here:


Best Regards


Graham Summers




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TideFighter's picture

My first read this morning was credit card offers in the mail.

The second read was a free offer from T Rowe to open a trade account.

The third read was a dental reminder appointment for a root canal and crown.

The fourth read was this post by Graham. 

As rated by reading stimulation, it has gone from bad to pathetic.

Graham, you suck. It's time for my nap. 

Snakeeyes's picture

The US will NOT default. The Fed will continue to try to destroy the economy through inflation as devaluation of the debt. These braniacs at MIT, Princeton and Columbia should be put in jail.

Then you have Dr Evil (Krugman) touting the minting of trillion dollar platinum coins to bypass the Constitution and let Obama/Congress binge spend on their friends. Krugman = Mega POS.

Tango in the Blight's picture


GOSPLAN HERO's picture


Very smelly, Graham.

The Trade Group's picture

Graham, why should anyone give any weight to your posts anymore? You have been consistently wrong for the past 3 years. First Europe is collapsing, now the US? Go away!

Mr Pink's picture

I always have to read the Phoenix Capital articles to find out what WON'T happen

s2man's picture

They won't default; that would hurt the bond holders (banks).  They will monetize, which will hurt the rest of us.

digitlman's picture

Too much water?


Turn on the BILGE pump!

MassDecep's picture

" US politicians are totally clueless"
Whenever I hear that statement of how clueless these politicians are, it tells me how clueless the masses are for thinking that. They are not clueless, just evil.

As soon as people start waking up to this fact, we may start seeing change; but I doubt we will...

Fuh Querada's picture

An even bigger issue: how and why Graham could fuck off.

Tango in the Blight's picture

Pay Tyler more than he does and ask for his removal.