Markets Could Help Close the Deal

I'll let you read about the latest machinations of the dysfunctionistas up on Capitol Hill. The House melted down -- turns out the Cruz strategy had some glitches -- and the Senate has taken over (there's a comforting thought). Democrats, to their credit, are trying to avoid locking in sequester-level budget cuts, while Republicans are begging for some face-saving concession -- "just cut a damn tax or whack some poor people and let's get outta this mess!"

Senators Reid and McConnell are actively negotiating, but they appeared to be stalemated by the day's end.

So here's the question: I couldn't remember if the financial markets were open today what with Columbus Day. They are. And there's a real chance of a reverse of last week's relief rally when it looked like a deal was coming together.

We'll see. Traders might decide that the grownups are talking, and figure they'll resolve this sooner than later, certainly before Treasury's cutoff on Thursday. But if not, last week's melt-up could become this week's meltdown.

Not a good thing -- such volatile swings are unsettling and disruptive. But, like the 777 point decline when House Republicans rejected the TARP, only to pass it a few days later, that may be what it takes to end this charade.

This post originally appeared at Jared Bernstein's On The Economy blog.