For the past few weeks, as the debt-ceiling crisis has intensified in Washington, financial markets have been acting on the assumption that a deal will be done. This weekend, that changed.
House Speaker John Boehner’s decision Friday evening to walk away from the table (surely not coincidentally after the U.S. markets closed for the weekend) acted as the proverbial smelling salts that snapped global markets out of what had been a pleasant dream that all will be well before it’s too late. As the folly continued, slow motion, across the weekend, governments and market makers throughout the world seemed finally to realize what some had long suspected: Saner heads do not control Congress—and may not prevail.
