I was on the Alyona Show last night talking about the impending government shutdown. Regardless of your ideological predisposition, you have to see that this will have some negative effects for the economy over the short term. At this point, the damage is sure to be limited and is nothing to worry about. I don’t expect any major market reaction to this either. After a month or two, however, we are probably talking about recession.
The bottom line for me is that this is certainly no way to operate a large developed economy, shutting down the government over a minor squabble of less than one percent of federal spending. There is also the Ecuador risk factor, namely defaulting for political reasons. This has been broached. As I said in the video, the term ‘Banana Republic’ comes to mind.
Video below.