Deutsche Bank: Debt Ceiling "Will Get Resolved With A Big Sell-Off"

Tyler Durden's picture

We all know how this latest installment of Beltway theater ends: the negotiations continue until the 11th hour and 59th minute or maybe just after midnight, followed by a market flush, followed by a prompt compromise which retroactively fixes everything that was wrong, and with the US debt ceiling being raised by another $1.1 trillion.

Below is Deutsche Bank's Jim Reid commenting on precisely this.

Over the last 12-24 hours the small cracks that have appeared in financial markets over the last week have started to edge open a little bit wider. On the plus side this may start to help concentrate the minds of the politicians a bit more after another day of stalemate and lack of urgency. Our thoughts are that this will get resolved when either the market forces the issue with a big sell-off or when we get closer to an as yet unspecified hard-date as to when the US runs out of money. On the latter, one concrete thing we did learn yesterday is that Treasury Secretary Jack Lew will testify to the Senate Finance Committee tomorrow at 8:30am (ET) to discuss the debt ceiling including issues of how hard the 17th of October date is. This meeting may give us some improved clarity as to when 1 minute to midnight is going to be in this crisis. The perception is that it’s actually nearer the end of the month.

And therein lies the problem: because everyone has seen this play out countless times, nobody want to be the marginal seller that pushes the market lower "just enough" to get the compromise, and then see it rip higher before they can get back in. Of course, that the only reason for getting back in is because the "market" is a centrally-planned, artificial abortion of the central planners' five-year long, and ongoing, experiment with "monetizing" everything that is not nailed down, goes without saying.

All that matters is the year end bonus, which in an age in which the Fed is the best performing hedge fund in the world (net of its massive mark to market losses of course), is getting increasingly more difficult to obtain. As for what happens on January 2 with the return on other people's money, well that most likely is someone's else problem.

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6th of May's picture

Ah, it's going to get up and much higher!

Arius's picture

lets hope we dont get into another fight between DC and NY .... these guys have huge egos.


we just cant handl these guys in DC, let alone to bring the New Yorkers now into the fight .... bad news

Headbanger's picture

Obozo wants to inflict as much pain as he can on the American people now cause he's so pissed we don't want him as Savior anymore with Obozocare.

So he's going to cause a market crash to punish Americans and blame it on the Repubs.

Just like Hitler turned on his own people for failing him as the Russians took Berlin.

NoDebt's picture

OT:  Whatever happened to the German elections and the immediate tanking of the market forecast to happen thereafter?

Watch yourself when people start throwing around hard dates.

odatruf's picture

The sell off won't be the resolution. That happens in the secondary market and the Treasury is unaffected by the prices there until the next auction.

That is when there would be trouble. Or there would be if the Fed wasn't dead certain to step in and buy whatever it took to keep rates low.

Does anyone think this would go any other way?

Keyser's picture

Obama is so vile he would probably burn down the capitol building and blame it on the GOP. After all, that's what Hitler did. 


BandGap's picture

Hitler offed himself as the Russians were taking Berlin. So....huh?

Soetoro wants to create as much havoc as possible and then appear to be the guy with the answers to everyone's problems. His problem is he has been exposed for what he is, a naked puppet for the banking establishment.

overmedicatedundersexed's picture

many on ZH have longer memories than ave tax serf...Obuma" I want to be another Lincoln" seems civil war really gives this guy? a hard on..prepare accordingly he wants to bring it to all ..congressmen (gop) will be arrested shortly if he follows his programing.

cossack55's picture

Will beheadings follow arrests? Can one buy tickets or video feeds?

Winston of Oceania's picture

No you will be sent straight to the Gulags unless of course you are willing to implicate your own Mother...

AlaricBalth's picture

If there is a market sell off which results in a resolution of the debt ceiling and budget impasse, it will be due to a plan hatched last week at the WH between the Pres and various bankers that met with him. The administration has been making this partial shutdown as painful as possible on average Americans and a significant move down in the market will cause people to scream for a solution.

Edit: Just saw your comment Headbanger and as you see, I couldn't agree more.

Headbanger's picture

And the solution sought by this tyrant administration is the desperate American people will want a charasmatic savior to lead them out of their pain.

It's looking more like 1933 Germany all over again!

AlaricBalth's picture

Desperate Americans seeking a charismatic leader to lead them out of their pain? The people believed they were getting a transformational leader who would lead them to the promised land back in 2008. Most are now realizing all they got was an egotistical, unqualified sociopath who happened to read quite well off a teleprompter.

Keyser's picture

Yeah, but the lame duck has 3 more years to fuck up the US. His approval rating according to the AP this morning is down to 37%. Can't wait for it to approach 0.00% 

Buck Johnson's picture

Do you remember that Obama back in August met with all the govt. financial people (Treasury the Fed essentially everyone) at the whitehouse, we never found out what that was about.  I think their won't be a last minute resolution and here's why.  There have been since last Friday until now off and on commenters on CNBC and CNBC reporters (Michelle Caruso) who have been saying that just because we go over the Oct 17 deadline doesn't mean the govt. doesn't have money to pay it's interest and bills from the tax revenue.  And also them saying that it's not truly a default unless the bondholders who haven't been paid (been EU'd/Greeked), have came to the bond organization to say that the US is in default.  In other words if you are able to talk to the bondholders and make them not go to the market and try to get a call of default then it's not a default. 

They wouldn't be putting this out their unless they know that this is going to go over the deadline.

zorba THE GREEK's picture

I think Boehner is making a boner by trying to repeal Obamacare.

The best thing the Republicans can do to achieve a victory at the

polls next November, is to let Obamacare take effect now.

When people see how bad it really is and how much more it

will cost working Americans for their healthcare, they will

voice their disappointment by voting out the party that conceived

this monstrosity and released it on the unaware masses.

involuntarilybirthed's picture

Obamacare fell getting out of the gate so we may never know how bad it could be.

BandGap's picture

The angst bubble won't last until next November.

The protests are going to begin this week. Someone will do something stupid, or step up into the face of authority. There will be an over-reaction by the authority and then an over-reaction by the original offenders.

In a way it will be good for the American soul to ball it's fist in the face of all this bullshit.

Winston of Oceania's picture

It will NEVER go away once fully implimented, no matter how miserable it performs they will only dump more money into it because it represents TOTAL control of the sheep. This is true regardless of L or R save those who are trying to stop it now. IT WILL NOT BE ALLOWED TO FAIL ON IT'S OWN; MARK MY WORDS.

Gordon Freeman's picture

True dat--once implemented, it will be kept going until the absolute bitter end.

Winston of Oceania's picture

I can't believe that asshole from silk road stole my gaming name for halflife and DOD, curses...

replaceme's picture

I mostly agree on letting BarryCarey fail, but I'm hoping the Republican strategy is to make sure they're seen as fighting it tooth and nail before cracking.  Theater, to be sure, but the fight matters to the rubes. 

I sorta think the Dems played it a little silly, too - they've put Boehner in a position where he can't do what he probably wants to without looking like a pushover, which he probably is.

Slartebartfast's picture

Dunno.  Could be different this time.  Rumors running around that things are already broken.  Could it be that the debt limit kabuki is just a smoke screen to give the sheep a "context", for the upcoming lies when everything finally falls apart?  

"The world financial collapse was caused by those bad, bad Rebooblicans!  Now go back to watching Miley Cirus and Football!"

dick cheneys ghost's picture

does Japan have a ''debt-ceiling''???

me thinks this is just to get QE to $150Billion+

fomcy's picture

Crisis? GOLD knocked DOWN hard again and Dollar flying, this is

Banksters freak show!

SheepDog-One's picture

AW just shutup Douchebag Bank you're a bunch of crooks!

Dr. Engali's picture

Douche bank better hope there is no big sell off with 73 trillion in derivatives on their books.

Arius's picture

they know what they are talking about ... i wouldnt bet against them

Dr. Engali's picture

Betting against banks (at least against their recommendations) has been a strategy which has paid off handsomely on several occasions.

GetZeeGold's picture



73 trillion in derivatives on their books


No worries.....they have Dick Fuld consulting them. No way he'll make the same mistake twice.

malikai's picture

Jim said "Market Forces".


Stoploss's picture

Does Jim know we are already over the "to be raised" ceiling?

So, if they raise it in the next 10 minutes, we are already over that.

NoWayJose's picture

It's the olde dilemma of whether to sell now before it drops and hope you can get back in before it rockets higher. If Yellen jumps on board you know that Wall Street has many more years of free Fed money. Best play here is gold - either we get a default and the dollar tanks, or we get a deal with lots if free spending and a Yellen on top of that.

Gordon Freeman's picture

Gold is just starting its next long wander in the wilderness...Silver has once again become entirely irrelevant as a means of making money

Iam_Silverman's picture

"Silver has once again become entirely irrelevant as a means of making money"

Ahhh, Gordon - there lies the fault of your strategy!  PM's are best used for a hedge, not daytrading!


Just like that crowbar you found right after the Anomalous Materials lab exploded, it is something you keep on hand for when all of your other ammunition has been expended or you need to make a "stealth kill".

involuntarilybirthed's picture

When politicans investments are endangered they will act.  It only matters what goes on inside the castle (beltway).  The serfs can eat rice cakes.

Downtoolong's picture

Debt Ceiling "Will Get Resolved With A Big Sell-Off"

You hear that Bohner, and you too Janet, these are your orders. How else can Wall Street keep milking the system if you don't help us pump and dump.

And don't say we don't give you choices either. If you prefer we can also dump and pump instead. 

Oldwood's picture

Why don't you guys go get a real job instead of enabling these fuckers to rape and pilage the world? I know the lure of easy money and placing the bet is large, but just back away from the table and save us all a lot of grief.

odatruf's picture

Not while there is a dime of dead money left in play. None of them are backing away while there is more to be had.

Tsar Pointless's picture

Oldwood, raping and pilaging the world is the American WayTM. What - you want them to get an honest job?

My laughter just won't cease.

Then again, how many "honest" jobs truly exist in the world at this point?

Zymurguy's picture

Congress won't take too much more pain... their personal portfolios are so bloated with insider deals and lucrative positions they'll come around soon.

swmnguy's picture

This crisis is too obvious, and too contrived, to go to waste.  I'm guessing this will be the cover for the next phase in transferring the wealth of the middle class to the elites.   Hard to say exactly what.  Obama's always wanted to dismantle Social Security and Medicare; I'd guess there will be an agreement to change the formula, raise the age, lower income maximums; something like that.  Obama will claim the Republicans forced him, Republicans will claim they got a good enough deal to go ahead with raising the debt ceiling.  The debt ceiling will go up $1 Trillion in exchange for $2 - $3 Trillion of middle-class money going to Finance, just like the deal in 2011.

You don't want to listen too closely or you might get sucked in by the rhetoric and confused.  Just know that the fusion of corporate and State power continues apace.  The money of the middle class is diverted to the very top.  Feudalism is reinstated, with the Corporation taking the role the Church used to.

kurt's picture

They already told us: depositors money is bank owned by law (recent thank you f-in senate). Think of derivatives as a Gigantic Antimatter Flywheel. It slips forward vacuming up ALL deposits, your deposits, every medium to small business deposit. Larger corporations are protected by flim-flammery.

These are planned milkings.

Identify the perpetrators now as they will take down the internet as a side show. Paper copies!

Why do you think there is police state build up?

Story ends with a Mexico-style devaluation.


MrBoompi's picture

Although I certainly expect a selloff (someone needs to pocket all the funds that have been created for pumping up stocks), I believe TPTB will use this latest threat of financial Armageddon to cut entitlement programs. One things for sure, the average American who has any investments at all will be harmed and the insiders will have cashed out before then.

falak pema's picture

Deutsche bank alone can bring the Euro down; as nationalising it and honoring its debts is impossible; even for a triumphant Mutti, if ever push goes to shove in the fiat domino world.

It will mean massive hair cuts for counter parties if it happens in an ugly way. Every day longer on QE printing of all FOUR CBs  means a similar day shorter on a possible debt moratorium in an ORDERLY fashion in first world; one more nail in the coffin to  bury  the real global economy in  the throes of disorderly destruction; fatal disease of Pax Americana $ hegemony as it does not create real growth, just feeds slave labour arbitrage meme. 

What are the choices left to the central bankers?

Its a bit like what Gen Macarthur said in his stand off with Truman when he wanted to chase the Reds beyond the 38 parallel in Korea. "This truce means we scuttle the Pacific one day to appease the Red menace, all the while we won it with the sacrifice of american blood."  Well, scuttling the Pacific to the Red menace is not on the agenda, whereas scuttling it to nuclear poisoning is very much so now on the Fuku agenda. How the picture changes. 

QE infinity is supposed to save the civilized world's way of life as it was engineered and spawned to pay for imported OIL in London's Eurodollar market; all tax free for depositors. Precisely from the threat of inevitable resurgence of barbarian invasions in name of Allah from those who got cheated from this huge wealth transfer stolen from their  lands by annointed Oligarchs wallowing in riches based on US protection; or surrogate ripple effects in contiguous regional territories of newly spawned terrorist cum impoverished immigration masses; aka south of El Paso or at Lampedusa. You can see the domino effect of the financial world toxicity is mirrored by the domino effect of world impoverishment via war cum political instability feeding economic rape. 

"The Huns are at the gates and they all eat dates or sell crack!"

So to save the world we have to print and ask them to eat our paper as if it were golden apples; replacing their junk white powder with our powerful "yes we can" paper. 

Not bad as line of reasoning except it has as collateral the demise of first world citizenry.

But who cares, in the Caymans about that, if it allows the party to go on for another decade! 


world_debt_slave's picture

and the charade continues, the Fed controls the market and the US is a deadbeat living on borrowed time.