Wall Street in denial about Debt Ceiling Armageddon

Megan McCardle at The Atlantic: I've been having some disturbing conversations with both finance people and Washington people over the last few days, that have only confirmed the disconnect I wrote about a few weeks ago. Each side is sending signals that the other side is not reading correctly. And this is getting more dangerous by the hour. The core fact is that markets haven't sold off nearly as much as you'd expect if Wall Street were really freaking out. This is not because Washington pols have told their Wall Street paymasters about a secret deal that just hasn't reached the ears of those of us reporting from down here. Nor are they calm because they think that a failure to raise the debt ceiling will be no big deal. They certainly don't believe that a forced spending cut of 40% will somehow make us extra-super-more-likely to make us pay off our debt. No, they're relatively calm because they simply cannot bring themselves to believe that we're not, in the end, going to raise...(Read Full Post)