As the expected time at which the US will hit the current debt-ceiling approaches, with no sign of a deal, market participants' guess at the probability that debt obligations will be defaulted on rises too. This will act like a monetary contraction, a credit-squeeze, and will put compounding pressures on financial institutions and the sovereigns that back them. Default threats like this also act just like expropriating taxes of the sort that the Tea Party Republicans balk at.