Debt Deal Passes, Dow Tanks, Moody's Warns

Hallelujah, a debt deal passed and the economy is saved, because the President said that's what would happen if we passed a bipartisan deal. Look how happy he is about it all. Here is the official statement from whitehouse.gov.

This afternoon, Congress approved a compromise to reduce the deficit and avert a default that would have devastated the economy. Speaking from the Rose Garden, President Obama thanked the American people for reaching out to their elected officials during the debate, and stressed that this compromise guarantees more than $2 trillion in deficit reduction, and will ensure that as a nation we live within our means, while still making key investments in things that lead to new jobs, like education and research.

So how did the markets react?

The Dow Jones Industrial Average nose-dived 265.87 points, or 2.2%, to end at 11,866.62, its worst one-day loss since June 1. The eight-day losing stretch was it's longest since October 2008.

To be fair, it's not known whether this was a case of the market focusing on the sucky fundamentals of the economy (consumer spending and income are statistically at zero growth) or the fact that this deal does little to deal with the debt. Who cares, it just shows the failure of the current deficit spending to revive the economy. This is because this has been a balance sheet recession, and we know from the Japanese experience that massive government stimulus does not result in a recovery of the economy.

How about the ratings agencies? First of all, let me say that I have little respect for them as they continued to rate mortgage backed securities as highly safe right up to the point of collapse. They are creatures of political habit. However, given all that, even Moody's threatened a downgrade after the debt bill passed, reinforcing the fact that very little was accomplished. Zerohedge rips Moody's here.

So, some of you might be saying, B-Daddy, you hypocrite, you supported this bill. I did indeed, knowing it was not enough, but it was what we could get this week. We just keep fighting this fight over and over again, until we grind down the opposition. The left is running scared, knowing that we have seized momentum. But just like in basketball, momentum can be an elusive thing. Our only hope is to keep pressing the attack, and keep the left on defense. Let's see how many sugar coated Satan sandwiches they can consume.

Image of red velvet whoopie pie (aka sugar coated satan sandwich) from justsocakey blog.