Goldman Sees 50% Chance Of A Government Shutdown

As we pointed out earlier, the chances of government agreeing any kind of debt ceiling deal (and avoiding a government shutdown) is dropping fast as USA default risk spikes and the Treasury Bill curve inverts. Goldman Sachs is now concerned also…

Uncertainty in The White House is starting to make investors realize the chance of successfully navigating the debt ceiling crisis without a government shutdown are dwindling…

Via Goldman Sachs,

Low approval ratings raise legislative risks.

 

In the near term, we believe there is a 50% chance of a brief government shutdown, as the president seeks to solidify support among his base by embracing more controversial positions, despite needing Democratic support to pass spending legislation.

 

That said, we expect that the debt limit, which needs to be raised around the same time, will prevent a longer shutdown from occurring.

It seems the credit markets are a little less sanguine than Goldman… 

 

As we noted earlier, sure, Congress has always come together at the 11th hour in the past.  They’ve raised the debt ceiling 78 times over the last 57 years.  So, won’t they just raise it again?

This time around, we have some reservations.  Quite frankly, this Congress has proven that it is not motivated to do what’s best for the American people.  Each representative has an illogical logic unto himself.  Just ask John McCain – he doesn’t know what he wants until the precise moment he votes.

What’s more, these days the debt ceiling has become ultra-politicized in Congress.  Big time horse trading must first take place before an agreement can be reached.  Big time bluster and chest pounding must take place too.

The point is, over the past six months this Congress has been incapable of getting a doggone thing done.  What makes you think they’ll somehow get their act together in just 12 days?

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