MF Global: 55% Chance Congress Fails To Raise Debt Ceiling By August 2

Tyler Durden's picture

Goodbye 11th hour. Hello 12th hour and 1 minute. According to MF Global's Chris Krueger, the probability that congress fails to raise the debt ceiling by August 2 is now 55%. Which means at least a 1 if not more notch downgrade by the rating agencies, which means massive and completely unpredictable spillover effects in money markets, structured finance, muni and all other financial products, which means the military will soon have to conduct many more urban exercises to prepare for "Tehran" (because the Iranian capital's downtown has at least 3 John Hancock center replicas). In the meantime, the market still thinks that Bernanke can fix this.

Bloomberg All News summarizes the key points in Krueger's note:

  • "Getting the deal was the easy part; passing a deal in the Congress is a challenge”
  • Chances Congress fails to raise debt ceiling if House doesn’t vote on Boehner plan tomorrow, 45%
  • Chances Congress fails to raise debt ceiling if House passes Boehner plan, 25%
  • "Don’t focus too much time on a future downgrade, default is the immediate fire and could answer the downgrade question much sooner than is appreciated"


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Buckaroo Banzai's picture

I'd like to put $500 on the over, please.

Clueless Economist's picture

55%??  Why not guess 54% or 56% or just say its a 50/50 chance?

DonnieD's picture

They want it to look like they're not flipping coins in the back office when they make this shit up.

wandstrasse's picture

reminds me of the JPM prediction for gold at $1,150 in 2016, just recently posted here on ZH.

Arthor Bearing's picture

There's a 62% chance that those numbers are complete bullshit. Sixty. Two. Percent. I've done research.

midtowng's picture

Exactly. This is a political decision, not a financial one. He's not qualified to make an estimate.

Bee1000's picture

75% chance they raise the debt ceiling with zero cuts.

Cleanclog's picture

Dart board says 22%

Zero Govt's picture

my darts says it's a 1.34% chance

..i'm better at snooker to be honest

Archimedes's picture

Of course The Bernank can fix this! He has many tools in his arsenal. He can lower interest rates, change the language and print money.

What else does he need? 

Zero Govt's picture


he needs the backing of Congress . . . . 'knock, knock, knock'

that'll be those big-bankrupt big-spending clowns (Congress) at the door now ..yep, you're right, he has everything

chartcruzer's picture

Regardless of political motives or related performance more adversity is being leveled on the US population each day with allot more to come. The article by Hudson nails this.
Hudson tries to assert that US politicians are conciously acting contrary to the well being of the population and in support of the wealthy bond holders. Establishing intent like this is a difficult sell as the circumstances are complex with entropy increasing smartly these days. One, has to ask the question if the population would be better off if the politicians started abusing the bond holders? This is a very difficult economic boundary condition to evaluate.

One day the federal government will have to downsize by half (to a balanced budget). The states and cities will face similar cuts. As a result, we are going to loose ~8% of GDP. That large a GDP cut (wheater it's over the long run or short run) will be,,,, well,,,, serious. All comes down to that darn debt bubble again.

Anyway, we will, one day return to a 'sustainable' economy where trade is basically balanced, deficit spending is tiny, and social programs only spend the money that comes in. A common sense financial renaissance of sorts. At the same time we will be forced to get our energy 'act' together as gas will be $8 per gallon. Given the abundant natural resources in the US and it's modest population load, I believe this financial and energy renaissance can be wonderful. A time of simple pleasures, family, friends, hard work, and peace. I'm just not sure about the road to get there.

I think it comes down to a few charts. Note the parabola being formed by the first. The next few years could have impressive returns.[s172502148]&disp=P

also not the performance of gold relative to other assets.[s238082247]&disp=P

also note the relative performance of silver to other PMs[s234896965]&disp=P

trav7777's picture

there are gonna be a lotta disillusioned bitchez out there who can no longer afford the LV bag they thought was the very meaning of life.  The period in between nihilism and this renaissance will be...challenging

ibjamming's picture

What happens when (in my opinion not if) they do raise it at the last minute?  What will win and what will lose? Stocks up as they anticipate QE3?

partimer1's picture

you either get to raise or not,  what the hell is 55%?  what does that mean?  it is really BS but it sounds scentific when you have a %.  That's what the Wall street is all about.

trentusa's picture

Hey Tyler where u at? I can't believe my eyes. What does ZH rate the chances of a US default, as of this morning? I'm thinking 1 in 3 maybe via cdos?

     I'm a member for 32 weeks and Tyler's never been wrong yet.


geminiRX's picture

This community has been predicting an epic crash since May 2009 which hasn't really materialized yet (May 6 was pretty short lived). So while some things have been really good picks, others such as explosive volcanoes and market crashes haven't occurred yet. Truth of the matter is, this may be just another dip buying opportunity before a massive QE3 ramp job. The debt ceiling will pass - it is just theatrics for political purposes. Those thinking the US will default next week are headed for massive disappointment. Don't get me wrong, the US will default eventually - just not next week.

Mad Cow's picture

Please let us all know when it will happen, thanks.

Pool Shark's picture


What's so magical about August 2nd? The feds have funds to go at least 8 to 10 days past that.

In fact, didn't Turbo Tax Timmy claim Armageddon if we didn't get a deal by last weekend?

Where's the Armageddon?


I Got Worms's picture

The Bammer has his 50th birthday bash on August 3rd. (no shit - think the Aug 2nd date is a coincidence?) He needs this resolved before then, so he can truly enjoy the cotton candy machine and pony rides.

Diogenes's picture

You are trying to tell time by the second hand on a watch. Try using a calendar. The crisis began in 2OO8 after being set up by actions dating to the Reagan administration or earlier. Now the media is finally noticing the  US is up shit creek without a paddle. Believe me this budget crisis is a pillow fight in the middle of a long running Tag Team  Cage Match to the Death for the worlds economies. We wont know for sure who the winners and losers are for another ten years. All I can tell you is the winners will all belong to the big club at the top of the pyramid and we arent in it.

trentusa's picture

Nobody wants Armageddon. We just want our country back from the big banks and we can do it by voting for Ron Paul.

     Lehman was TB2F but we all yawned and forgot to panic. This time though if you leave yer money in the market it won't grow back...

papaswamp's picture

They will raise it just as a hurricane strikes the Texas coast distracting the oh so short attention span americans. No real deficit/debt reduction. The US will be in the $16 T debt zone by this time next year reaching 100% debt to GDP if not sooner. 

trentusa's picture

the president will not get away with dismissing Congress & raising the debt ceiling unilaterally, PapaSmurf

Thomas Jefferson's picture

Get ready for a false flag attack folks.  The president has lost control of the country and TPTB need an excuse to rally around the flag.

slewie the pi-rat's picture

mf global = shills for bankster deep dark pools. so 55% of failure by aug 2 = now priced into the swaps?  while the bond is safe havening against default?  wow!  this stuff is amazing, maynard!

roccman's picture

There is near 100% certainty that oil peaked within the last few years.

This in turn has defined our current economic collapse.

With oil peaking - growth (on a finite planet) is coming to an end.

No growth - no debt servicing - default is ordained.

Don't you think it is interesting that not one word about future energy supplies is factored into the matrix of this "budget" chatter? Hell - denninger thinks its the greenies keeping oil out of his veggie VW.

Is there not ONE economist that factors in significantly reduced oil supplies into the mix? NOT ONE?

or does everyone here think we are gonna find 4 Gahwars each year FOREVER?

bottom line - no more cheap unlimited energy - no more debt servicing because POWERDOWN becomes the new norm.

trav7777's picture

4 Ghawars?  We'd need to find 4 then 8 then 16.

People need to get their heads around the ordinary mechanics of geometric growth.

This is only what I've been saying for like years...basically dating back to 2005 or so.  If Douchinger didn't hide banned posters and still had the oil forums, you could read where I said PO meant a relatively unexceptional "sustained global recession."

Now for a growth animal like debtmoney and for money ITSELF relying on future borrowing and repayment of existing money plus future money (interest) that hasn't even been created yet (and would need to be borrowed)?  Forget it.  Flocked.

roccman's picture

yep...Karly "my veggie vw will outrun the killoff" Denninger banned me for posting an article that said oil could go to $1000/barrel.

in the span of three days in 1973 the price of oil increased 400% - and THAT "crisis" was politically driven - NOT geologically.

simmons was silenced because he knew and was speaking about the WORLDS GREATEST SECRET.

so here we sit - circle jerking about a fake budget with the fantasy of unlimited and cheap energy NEVER being factored into the equation.

oh well - at least i will die knowing it was neither about the left, right, or was always about the human project eating oil and that oil ending.

we got drunk from the wine in another's bottle - and now that bottle is empty - too bad so sad - that is just the way the cookie crumbles.

KnightsofNee's picture

My research indicates a 57.098623% CONgress fails to raise debt limit.

My research also indicates a 97.098623% chance that Obama will use external powers to continue spending.

Disclaimer: My research has not been peer reviewed. I do have mulitple degrees in Bull Shit, More Shit and Pile it High and deeper from The Pheonix Rising University School of Econometrics.

trentusa's picture

so long as one is willing to freely admit we're talking over our own head, game on... I'm an accountant tho so thats why I hate you finance guys always begging for jobs at Job Fairs.

      Only accountants & air conditioning repairmen have jobs right now bc of u finance guys think u can just print money out of thin air but we have to work for a living...

Cortez's picture

68.4 percent of statistics are made up.  The other 31.6 percent are based on flawed data.

KnightsofNee's picture

And you have mulitple degrees in econometrics from what prestigic university?

trentusa's picture

      I'm starting to recommend friends & family to emergency exit the US dollar & stock market, but that type of restructuring is beyond my comfort zone. My advisors are a primary dealer bank & refused to give me good restructuring advice. When I askd them about inflation 6 months ago they recommended I buy a bewildering array of US Treasuries but no gold or commodities, forget shorting the dollar going long commodities...

               I'm recommending people use Phoenix Capital Research's Private Wealth Advisor as per yesterday's article. Unless Tyler has other recommendations for emergency restructuring advice? I'm ready to bail out or double down on the first hint of news... 


DosZap's picture

Not for some............................

trentusa's picture

Awesome!! Is a volatility forecast service?

   Aside from Tyler I learned everything I know from Sheldon Natenberg, and finding a vol forecast service using even ARCH let alone Hong Kong not so easy.

trentusa's picture

i hate finance people, except for the ZH community.

   Pardon me, present company excluded. Of course.

Scisco's picture

Not hiking the debt ceiling will probably give Benny the perfect excuse for QE3. It will be interesting to watch them attempt contain the spill over effects from both events, the default and QE3. Will it be a Kurplunk moment? I got my popcorn.

Peter Pan's picture

This is all plain old theatre designed to give the stock market a big "happy boost" once the ceiling is raised. Someone in the meantime is making money or setting someone else up for a big loss.

texas goldfinger's picture

I'd like to know the odds being given by the English bookies.

Peter Pan's picture

I live outside the USA but I find the President's warning about Social Security checks quite amusing given that he is not issuing the same warning to Congressman about their pay as well.


trentusa's picture

All the most talented crooks live in London.I'm starting an int'l gold arbitrage mining company myself from the Congo to London while its still legal. Cognitive dissonance is interesting term for freethinkerz. PS i'm looking for shareholders. Let's start a ZH hedge fund.

jmc8888's picture

Only Glass-Steagall can end this madness, the rest is the art of can kicking, with either real cuts that kill grandma, or sleight of hand that doesn't cut anything.

But the debt is fraudulent, so cancel it.  Glass-Steagall


The funny thing in all this, is they'll try to spin it as, 'we were recovering and almost out' when this happened.  Sorry, depression never ended, new dark age was already coming, this was just a different catalyst to an already sure fate.

Don't let them bullshit you, this 'event' didn't alter the course we were on one bit, just made it come a bit sooner than it could have been if they played bankster ball for a bit longer.

All bullshit, because we wouldn't pass Glass-Steagall and take the power from the banksters. 

JOYFUL's picture

Glass Seagull...can't quite place it....was that a band from the Iron Butterfly psychedelic rock period?  Tried researching your reference but all I could come up with was a band styling itself as "Industrial Noise Pollution"...or maybe that's just one of their songs, like 2x Taxation… Without Representation?...mind blower.

I don't get your reference. This whole economic thing is clearly for losers. Think I'll just buy somemore AU now.  

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