FWIW, the following is my current take on things: ( Much to the chagrin of fat Pandy )
Both sides in the relentless debt-ceiling debate are getting further and further entrenched, and hardened in their respective positions. If a grand compromise was to be reached, it should have happened by now. The reason for this impasse is clear. Each side knows full well, that if they abandon their principled positions, they will completely alienate their base, and most likely not be in power come November 2012.
The Democrats want to maintain near term spending in place, so as to both appease their liberal base, and more importantly, keep the sputtering economy afloat until the elections. Also, they have Benny & the Jetts in their pocket, ready to give them an extra jolt of QE, a few months before the actual elections takes place.
The Republicans on the other hand, know exactly what brought them back to power, and that was having taken a firm principled position on curtailing massive government over spending. The critical Tea-Party vote certainly made that crystal clear. They also know, that if they force Obuma's hand by demanding and obtaining major upfront reductions in spending, it will most likely stall the economy going into the critical elections. Thus, putting further blame on Obuma's mis-handling of the economy.
The point here, is simply that both sides know, that if they give in to the other in the slightest, they will seal their fate come election time.
Thus, having said this, my view is that the following scenario will come to fruition; As the impasse closes in on the August 2nd deadline, Obuma & Geithner will instruct Benny & the Jetts to orchestrate a brief very sharp waterfall decline in the Dow, so as to scare the pants off of the Republicans, forcing them to the table for a compromise. This also may very well explain why we got that incredulous moon shot out of nowhere, in the face of continued worsening economic fundamentals. They simply used the supposed Greek band-aid as an excuse to turbo charge a rally, so as to give themselves the necessary room for the pending planned waterfall.
Evil plan a la Tarp 2.0 is in place…..
Consider yourselves warned…..and position yourselves accordingly as we approach the August 2nd day of reckoning.