Why are the markets so calm about the US shutdown and debt ceiling debates?

The "Fear Index" is languishing at 17.

The government of the world’s largest economy is shut down and the current debt limit of $16.699 trn was expended in May. Since then the US Treasury has only managed to keep the show on the road by using what it calls "extraordinary measures" but even they will all have been exhausted by 17th October, (-ish).

It now looks increasingly likely that the two questions of passing the Continuing Resolution Bill to allow the government to keep spending money, and raising the debt ceiling, so that the US can repay principal and interest as they become due on current debt, and subsequently issue yet more IOU’s, will become co-mingled.

The trouble is that there is now a three party system in the States; Democrats, Republicans and the Tea Party, and the latter seem to have become almost impossible for House Speaker Boehner to rule, as evidenced by their insistence that the Continuing Resolution Bill was sent to the Senate only following the addition of amendments that would de-fund President Obama’s cherished Affordable Healthcare Act. Amendments that stood zero chance of ever getting through the Democratic controlled Senate.

The moderate wing of the Republican Party is now livid with the Tea Party-one gathers Republican Senators recently fired a volley of angry questions at prominent Tea Party member Ted Cruz, (he of the recent 21-hour filibuster on this matter), their main point being to ask what is his overall strategy, how did he ever think in a million years that he or the Republicans as a whole would come out of this in better shape for next year’s mid-term Congressional elections?

In the chilling words of Vanderbilt University public policy professor Bruce Oppenheimer, "The thing that's different about these Republicans, (the Tea Party), is their unwillingness to bargain," and  "I'm not sure if it's because they lack government experience or they've made such strong promises to their constituencies, but they've put their feet in cement and can't or won't move."

This will very probably end with Boehner leading enough Republicans into a deal to vote with Democrats to get the requisite legislation through, even if this contravenes a party policy known as the “Hastert rule” which prevents a bill getting to the floor that doesn’t command majority Republican support.

A further disturbing factor was the Treasury’s perhaps naïve assurance that in fact Oct 17th isn’t a firm deadline, as they can russle up another $30bn to keep things going to the end of the month.

What I find most chilling, however, is the markets insouciance towards the whole debate, especially the debt ceiling. The Vix Index of equity market volatility, the so-called "Fear Index", is languishing at 17, whereas it reached 48 during the last debt ceiling impasse in August 2011, as the S and P 500 Index fell 15 per cent in a matter of days. Admittedly simultaneously the Eurozone crisis had markets on the edge then, but one gets the distinct feeling that everyone now believes there will be eventual agreement, and sees any dip in prices as a chance to buy stocks, or is sitting comfortably overweight.

Markets always cause the most pain they possibly can; in a world where everyone thinks a solution will be found, but actually has no idea how, there is a distinct chance that before this is over the markets suddenly wake up to the gravity of the risks involved and suffer a very significant pull-back, if not a crash.

Photograph: Getty Images

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

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Grenfell survivors were promised no rent rises – so why have the authorities gone quiet?

The council now says it’s up to the government to match rent and services levels.

In the aftermath of the Grenfell disaster, the government made a pledge that survivors would be rehoused permanently on the same rent they were paying previously.

For families who were left with nothing after the fire, knowing that no one would be financially worse off after being rehoused would have provided a glimmer of hope for a stable future.

And this is a commitment that we’ve heard time and again. Just last week, the Department for Communities and Local Government (DCLG) reaffirmed in a statement, that the former tenants “will pay no more in rent and service charges for their permanent social housing than they were paying before”.

But less than six weeks since the tragedy struck, Kensington and Chelsea Council has made it perfectly clear that responsibility for honouring this lies solely with DCLG.

When it recently published its proposed policy for allocating permanent housing to survivors, the council washed its hands of the promise, saying that it’s up to the government to match rent and services levels:

“These commitments fall within the remit of the Government rather than the Council... It is anticipated that the Department for Communities and Local Government will make a public statement about commitments that fall within its remit, and provide details of the period of time over which any such commitments will apply.”

And the final version of the policy waters down the promise even further by downplaying the government’s promise to match rents on a permanent basis, while still making clear it’s nothing to do with the council:

It is anticipated that DCLG will make a public statement about its commitment to meeting the rent and/or service charge liabilities of households rehoused under this policy, including details of the period of time over which any such commitment will apply. Therefore, such commitments fall outside the remit of this policy.”

It seems Kensington and Chelsea council intends to do nothing itself to alter the rents of long-term homes on which survivors will soon be able to bid.

But if the council won’t take responsibility, how much power does central government actually have to do this? Beyond a statement of intent, it has said very little on how it can or will intervene. This could leave Grenfell survivors without any reassurance that they won’t be worse off than they were before the fire.

As the survivors begin to bid for permanent homes, it is vital they are aware of any financial commitments they are making – or families could find themselves signing up to permanent tenancies without knowing if they will be able to afford them after the 12 months they get rent free.

Strangely, the council’s public Q&A to residents on rehousing is more optimistic. It says that the government has confirmed that rents and service charges will be no greater than residents were paying at Grenfell Walk – but is still silent on the ambiguity as to how this will be achieved.

Urgent clarification is needed from the government on how it plans to make good on its promise to protect the people of Grenfell Tower from financial hardship and further heartache down the line.

Kate Webb is head of policy at the housing charity Shelter. Follow her @KateBWebb.