OK, the credit rating agencies and the financial markets aren't waiting around for the Republicans and Democrats to "make nice" and do what they were elected to do. Here's the expected announcement that the pristine credit rating of debt securities issued by the U.S. Treasury are about to be downgraded.

http://blogs.wsj.com/marketbeat/2011...ble-downgrade/

Next steps after that?

• Interest rates on government bonds will skyrocket, making the deficit and national debt even larger.

• Both the stock market and bond markets will crash. This could really be bad. I'm guessing a decline of at least 25%.

• Our fragile economy will grind to a near halt. Unemployment will skyrocket, housing prices will decline even further, consumer confidence will reach historic lows.

• There's a good chance that those who have been buying our debt--mostly China, Japan and Saudi Arabia--will reduce their credit exposure to the U.S. by buying less of our bonds and bills. The Treasury rolls over about $100 billion of our debt each week, so our interest expense will increase very quickly. And if the buyers of our debt slow their purchases, our inability to fund government spending will become apparent very, very quickly.

What's so maddening is that the elected politicians of both parties drove us right over this cliff. Even though the President proposed a package of $4 trillion in reduced government borrowing, made up of $3 in spending cuts for every $1 in revenue increases, neither party would budge from the ideological roots of their base constituents.

As I said in another post, there is a third party in these debt negotiations--the capital markets. And they don't give a damn about political ideologies or political bases. It's going to be interesting to watch, as Americans experience significant pain, the fragile economy grinds to a stop, and government services simply disappear, how the politicians try to blame each other for causing it to happen.