I'm not worried right now about a debt default that shatters
global investor confidence in US Treasuries. I think that scenario
will be avoided. I'm concerned about another source of confidence.
Here's the latest on the situation from Politico at 1:51 ET...
House Republicans were awaiting a response Friday from the
Obama administration to a proposal to lift the debt ceiling, end
the government shutdown and set up six weeks of budget talks.
Senior GOP aides said they wanted guidelines set for the budget
talks. Once those were determined, it would expedite Congress's
lifting of the debt ceiling and funding of government. Government
could be reopened as soon as next week if a framework for this
process is agreed to.
House Republicans have scheduled a 9 a.m. party meeting for
Saturday. Right now, Republicans want to lift the debt ceiling
through Nov. 20. They also want to reopen the government but it's
unclear how long a continuing resolution would last.
Hmmmm... still sounds like a lot of moving parts here. Even if they
come to some agreement today or this weekend to re-open the
government, there are multiple tracks of negotiations they seek to
have. In other words, plenty of room for error and disagreement
down the road.
The GOP has its hands full trying to juggle conflicting priorities
here and not run the country into the ditch.
Which brings me to my question for the day that had me taking
profits into the big rally of the past two days:
Does a longer government shut-down begin to impact consumer
and business confidence in a way that snowballs and puts a dent in
4th quarter earnings?
We already hear the running estimates of how much the government
shut-down hits the economy and GDP, something like $300 million a
But that figure, however inaccurate, doesn't reflect the blows to
consumer and business confidence and, by extension, future spending
decisions. Spending decisions are not always quantitative. They
begin with perception and confidence.
And if/when they get cut back drastically because of a big macro
theme that scares people (like their government not working), it is
probably going to be felt in a different and bigger way than your
run-of-the-mill "consumers held back because of... (insert "higher
gas prices" or "weather" or "a tax increase").
In this light, I find it very hard to imagine how a 6-week
shut-down wouldn't have a big impact on the economy.
What's your view of the world's most valuable currency, confidence,
in this crisis?
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