“You dash into your office and arrive by 5 a.m., finding a whole lot more than the Tokyo traders hanging out. Dozens of panicked associates are already there, flipping the TVs from CNBC and Bloomberg to C-SPAN and CNN. Analysts are reading The Hill and Politico, trying to figure out where the congressional negotiations, which lasted all night and have dragged on for months, now sit. You take a look at some of your company’s positions, and reaffirm to yourself that you are in good shape, at least on paper: solidly profitable, light on crummy assets, and carrying a considerable cushion of cash and some foreign currencies. But you receive the first of a few bad calls at 6 a.m.

“Foreign investors are spooked, and they’re dumping Treasury bonds—billions of dollars’ worth. They had been selling them off for weeks, of course, possessing much less stomach for the idiocy of the U.S. political system than you and your fellow Americans. But now, investors in Asia and Europe are practically using tractors and pitchforks to move the bonds onto the markets. You and your fellow principals meet: Will the bond market finally force Congress to act? Will this sell-off prove temporary? Should you buy what everyone else is terrified of? Should you all be worrying about hunkering down and battening the hatches and hoarding cigarettes for the barter economy?…

“Within 72 hours, Congress has a deal on President Obama’s desk, raising the ceiling to $16 trillion in exchange for balanced budgets to take effect in fiscal-year 2015 and some serious cuts now. Treasury starts issuing new bonds and making all payments on existing ones. But the market panic requires the Federal Reserve to reboot its emergency programs, disrupts the housing market, permanently raises the United States’ borrowing costs, reshapes the world bond market, and shaves more than a percentage point off GDP growth—enough to throw the economy back into recession. Globally, investors no longer consider the dollar the reserve currency of choice.”

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“One day after being named to a presidential task force to negotiate deficit reduction, House Majority Leader Eric Cantor fired off a stark warning to Democrats that the GOP ‘will not grant their request for a debt limit increase’ without major spending cuts or budget process reforms.

“The Virginia Republican’s missive is a clear escalation in the long-running Washington spending war, with no less than the full faith and credit of the United States hanging in the balance.

“In the most recent budget battle — over a six-month spending bill — Republican leaders carefully avoided threatening to shut down the government. Now, Cantor says he’s ready to plunge the nation into default if the GOP’s demands are not met. People close to Cantor say that he hopes to make clear that small concessions from Democrats, including President Barack Obama, will not be enough to deliver the GOP on a debt increase.”

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“Just 27 percent of Americans support raising the debt limit, while 63 percent oppose raising it.

“Eighty-three percent of Republicans oppose raising the limit, along with 64 percent of independents and 48 percent of Democrats. Support for raising the debt limit is just 36 percent among Democrats, and only 14 percent among Republicans.

“Seven in ten who oppose raising the debt limit stand by that position even if it means that interest rates will go up…

“If the debt limit is not raised, the United States will default on its bonds for the first time in history.”

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