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Economics

The Debt-Ceiling Farce Is a Headache Investors Could Do Without

The game of chicken causes distortions in the most essential bond market on the planet.

An ABC News ticker in Times Square announces a U.S. credit downgrade on Aug. 5, 2011.

An ABC News ticker in Times Square announces a U.S. credit downgrade on Aug. 5, 2011.

Photographer: Andrew Burton/Getty Images

The latest twists in the seemingly endless saga of the U.S. debt ceiling underscore once again how strange the whole thing is.

The very existence of the debt ceiling is utterly superfluous. Every couple of years members of Congress have to vote to allow borrowing to fund measures that they’ve already approved through individual spending bills. Its main function is political: Whichever party isn’t in power at the time uses it to try to either extract something from, or embarrass, the other side.