Your Evening Briefing: Glimmers of Hope and a Warning on Debt Deal
Get caught up.
From left, Senator Jeff Merkley, a Democrat from Oregon, Senator Bernie Sanders, Independent from Vermont, and Senator Ed Markey, Democrat from Massachusetts, during a news conference at the US Capitol Thursday. Negotiations over Republican demands for budget cuts in exchange for raising the federal debt limit may reach an agreement in principle as soon as this weekend.
Photographer: Al Drago/BloombergThere are some optimistic noises being made about the US debt-ceiling fight. But Wall Street is warning that even if disaster is avoided, the economy won’t escape damage from this spectacular own-goal by Congress. Behind market fears of a historic default is the less-discussed risk of what would follow a deal. Many predict lawmakers will ultimately reach an agreement, but the bruising standoff and the Treasury’s efforts to return to business as usual will wreak significant collateral damage. Ari Bergmann, whose firm specializes in risks that are hard to manage, says investors should hedge for the aftermath. Here’s why.
The fallout is already global. America’s sway over the world economy is being eroded by self-inflicted policy wounds—and not just of the debt-ceiling variety. From a slow-off-the-blocks Federal Reserve in 2021 to this year’s regional bank bonfire, the rest of the world is wondering if the dollar’s preeminent status in global trade and finance may be worth reconsidering.