Shutdown

As of today, the government shutdown we are currently suffering has been the longest in modern history. 37 days and counting, where thousands of government employees are furloughed, until Congress authorize the treasury to fund it and reopen it. As you can see in the last column on the right, in the table below, the market seems to be numb to the fact that we don’t have a functioning government, which begs the question of the need to have a big government. Perhaps also the market is confident that this trick is just a politicians game in Congress to negotiate and put pressure on the other side of the isle, and it will be short lived. Interestingly, republicans are considered responsible for the majority of shutdowns since 1976, both in number and impact (longer durations). This reflects their frequent use of shutdown threats as leverage in budget fights. But in this case, it’s democrats that are being held responsible for the shutdown because they want more funding that republicans don’t consider acceptable due to current deficit situation. What is certain is that in the meantime, we will not have oficial economic data, such as inflation and unemployment, that should feed the Fed to manage monetary policy. The impact may be deeper than consider.

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