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A Single Step

Folks, after a debt-ceiling debate that lasted far too long, it appears that an agreement has been reached. The plan still needs to get through the Senate and the House, of course, but all signs point to a $2.1T raise with $1T in cuts and another $1.5T in additional cuts by way of a bipartisan committee.

Am I happy with this deal? It certainly isn’t perfect. But an immediate default (or, more accurately, delinquency) has been avoided, and I do like that we’re finally moving in the right direction. The market did, too. Equities took off overnight, and some of the fear trades were taken off. Gold, for example, is down as I’m writing this.

Scott Nations, president and chief investment officer of NationsShares and a fellow CNBC contributor, came by the studio for today’s broadcast. As he said, if this debt-ceiling agreement does anything, it changes the complexion of the conversation. The consensus is now that government should be smaller, not bigger, and a $14T deficit is simply not sustainable. For traders and investors, this means a less dangerous market that can work on its own fundamentals—things like interest rates and earnings— rather than having to focus on politics.

I completely agree. As the Chinese philosopher Confucius said, “A journey of a thousand miles begins with a single step.” We still have a long way to go as far as a balanced budget, but these first strides toward austerity are at least a start. I never liked the fact that this debate was taking place while our credit rating was at stake, but it did put the debt issue front and center. Now let’s hope that it stays there until the 2012 election season.

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