You're watching...
Nariman Behravesh, IHS chief economist, on how the uncertainty in D.C. over the debt ceiling is impacting markets.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
You with this theme here new warnings on the debt ceiling Treasury Secretary Timothy Geithner telling congressional leaders that the US will exhaust its borrowing limit as -- -- mid February.
-- -- the Federal Reserve Chairman Ben Bernanke urging congress to extend normal borrowing authority well before the deadline.
And earlier today Fitch warning BUS could lose its triple A credit rating.
So where do we go from here attending out chairman Karadzic chief economist for I HS narrowing wonderful have you with us.
You said he believed the US will not default on its -- so -- Washington get to that point we'll Republicans win any spending cuts he just -- rich.
Suggest there's a proposal out there delaying implementation of the obamacare lock for governments say thanks.
Look everything's on the table here including amid the delay that the Republicans are talking about.
My guess is our guess is that they'll go all the way down of the wire but they'll figure something out.
Probably enough to certainly precluded default whether there'll be enough to talk about a substantial reduction in the deficit and the debt.
I think that's a little more up for grabs but I.
I doubt very much the US is going to actually default but we'll get pretty close of that deadline.
And in the process the worry isn't so much so we default.
But that the markets could get very upset that as they did in the summer 2000 lap -- especially the stock market.
And that could be problematic.
The markets have to be -- what JD -- by Elvis dysfunction in Washington.
Having said that an -- how do you think this all impact the markets here in the first quarter.
Well you're absolutely right that the market markets are starting yellow -- this out well here's another of these silly episodes in Washington kind of thing.
We saw that and they in the fiscal Clinton debate of course markets really -- react very much.
But still a default as a default or potential default is is something that the markets worry much more about think.
Then going off -- fiscal cliff -- so this could be a bigger deal and it didn't -- particular.
We've seen in the past that it tends to affect the stock market.
Much more than the bond market that could be different this time is specially if we see one or more ratings agencies go through some kind of downgrade.
Right and we just heard from -- this morning saying specifically in -- statement if the plan does not include putting public finances on a more sustainable footing they'll have to appealing look at the US sovereign debt.
So clearly -- -- Reminding everybody know market reaction after the first.
Downgrade a year or so ago so what after a second downgrade are you really sure that we won't see a sharp rise -- interest rates.
I'm well not absolutely sure of course you have nothing certain here.
But but my guess is if there's a perception.
That the US is still good -- -- -- that's is that worth obligations.
And even if there is a downgrade.
My guess is the bond market.
Won't react that much.
Just just remember you know the the market shrugged off the the bond market and has shrugged off the S&P downgrade and since then rates have actually gone down.
But it's always possible again a lot's going to depend on whether or not.
This next round triggers a crisis of confidence if you well in the US government.
Bigger picture on the economy.
Better than expected news on retail sales today -- -- been improving.
What's likely that the US economy could have a stronger year than economists where expecting we have a fiscal cliff deal of course.
Yeah -- that's again an excellent question I think.
The risks are just as.
Good on the upside or just as big on the upside -- there -- on the downside.
Right now would argue the risk to slightly tilted to the upside.
Barring the the debt ceiling.
Issue.
There's a lot of growing momentum in the US economy a lot of good news consumer spending as your site housing we're really good so all of this and then you've got the energy moment that and the -- -- thing.
That's helping that industry and related industries there's that there is -- there -- a lot of bright spots in the US so.
As long as.
The they the guys in Washington don't market -- I think we have a good shot -- a decent year especially in the second half.
And -- Karadzic thank you so much appreciate your statement your commentary today.
Sorry we have breaking news right now I wanted to point -- -- shares of FaceBook take a look at that they are down.
Sixty cents that is good -- almost 2% right there you can see.
As a result of -- at this meeting that's going on right now on its major reversal of.
