One week to go, but President Obama remains confident U.S. politicians will beat the deadline to raise the debt ceiling, writes The Motley Fool.
Our call for more optimism in this world has seemingly fallen on deaf ears.
"US debt impasse spooks markets," says the Financial Times.
"Calamity looms as Congress quibbles," warns The Age.
"US impasse triggers sea of red," screams The Australian Financial Review.
All that was before President Barack Obama's address to the American people.
He didn't necessarily help things, saying if the U.S. debt ceiling was not raised, "We would risk sparking a deep economic crisis – one caused almost entirely by Washington."
He implored the American people to "seize this moment" and to make their voices heard, saying "If you want a balanced approach to reducing the deficit, let your Member of Congress know. If you believe we can solve this problem through compromise, send that message."
Problem solved then, hey? Politicians. Can't live with them, wish you could live with out them.
Meanwhile, back in the real world, gold soared higher again, hitting $1,622 an ounce during London trading.
The gold bugs are loving it. For them, the more doom and gloom the better. You'll see them dancing in the streets if the U.S. actually does default on its debt come August 2nd, just one week from now.
Read our lips
Regardless of Obama's plea to the American people, the U.S. will simply not default on its debt.
Sometime before August 2nd, we predict American politicians will doff their baseball caps, put their hand on their heart, give us a rousing rendition of the Star-Spangled Banner, and unequivocally declare the United States of America the greatest country on earth.
They'll then go ahead and raise the debt ceiling, saying their word is their bond, they never intended to, and never will default on their debt obligations, and as is printed on all American banknotes, "In God We Trust."
Picking yesterday's winners
The only slight stick in the ointment is tackling that rather large looking $14.3 trillion – and soon to rise – debt, a point not lost on gold bugs, pessimists, some U.S. politicians and ratings agencies.
But that soon, once again, will become tomorrow's problem. Kick that can down the road…
Speaking of ratings agencies, S&P has already said raising the $14.3 trillion debt ceiling by the deadline, and thus avoiding a potential default, is not enough to avoid a debt downgrade for the U.S.
It seems you can pull the wool over the debt ratings agencies eyes when it comes to sub-prime mortgages, but not when it comes to sovereign debt issues.
As if to prove they are on the ball, on Monday Moody's downgraded Greece's debt to junk status.
Where have you been? Greece has been junk for months, probably years, likely decades. Talk about shutting the stable door after the horse has bolted.
Next up Moody's will probably diversify into horse racing, telling us the winners of yesterday's races, charging us for the privilege.
Stock markets taking things in their stride
So what's the scoop from here for world stock markets?
Moody's will let us know in a few months, by which time we'll have moved onto our next crisis, likely talk of a double-dip recession in the U.S, contagion in the Eurozone and how the carbon tax is killing the local economy.
Despite the gloomy headlines and the mild sense of unrest amongst private investors, world stock markets are actually taking things largely in their stride.
The Washington Post quoted Fred Dickson of D.A. Davidson as saying "I think the markets are handling this in a very, very calm manner."
"There are great companies that are making a ton of money underneath this cloud of uncertainty from the debt ceiling debate," said fund manager Frank Ingarra on Bloomberg.
Aussies giving up the ghost?
Here in Australia, our markets seem to be taking things a little tougher.
Perhaps it's our ties to China, the U.S.'s largest creditor. If the Chinese economy slows down, for whatever reason, look out below for our miners, and therefore our economy.
As if to prove the point, yesterday, shares in BHP Billiton (ASX: BHP), Rio Tinto (ASX: RIO) and Fortescue Metals (ASX: FMG) all took it on the chin. But they weren't alone, and the damage was far worse for fallen resource heroes Platinum Australia (ASX: PLA) and AWE (ASX: AWE), off 11% and 10% respectively.
Perhaps it was yet another profit warning from a bricks and mortar retailer, this time coming from Premier Investments (ASX: PMV), owner of the Just Jeans and Portmans brands, amongst others. This comes on the back of recent downgrades by David Jones (ASX: DJS), Country Road (ASX: CTY) and Noni B (ASX: NBL).
Be sure to check out Fool Analyst Deal Morel's take on the sector. As to his opinion, the clue is in the title: Your retail stocks are dying.
Or perhaps it's just Australian's have become bored with our moribund stock market and are simply giving up the ghost?
Did Cadel Evans give up when the going got tough?
Is it time to be buying shares?
To give you another clue as to our thinking, we'll leave the final words to Warren Buffett…
"The most common cause of low prices is pessimism – some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer."
Of the companies mentioned above, Bruce Jackson has an interest in BHP Billiton. The Motley Fool has a trustworthy disclosure policy.