At casual glance it appears most are ignoring the government shutdown. While this is the first shuttering since 2018, there has been 21 since 1976. Maybe the impact of such has gone the same way as a dial on a TV. There were ample commercials stating, “don’t touch that dial.” Today many have no idea what one is talking about, equivalent to having $0.10 to make a call from a phone booth.
Is this perceived apathy a contradiction given how expansive government has evolved? Will attitudes change if threatened layoffs occur?
Equity markets are currently more focused on earnings optimism, prospects of more Fed easing and the incredible hype surrounding AI.
Treasuries sold off yesterday on growing fiscal concerns. Conversely both gold and bitcoin rose. Wednesday and Thursday is a planned $39 billion and $22 billion of 10 and 30-year Treasury auctions, respectively.
Many believe a sovereign debt crisis will occur in the US/western democracies as there have been more promises made than there is money to deliver on them. This was the candid assessments recently from the former finance ministers from both England and France, and partially from Germany.
The finance ministers stated the obvious…taxes must be increased, and spending must be reduced. Everything must be “on the table, guaranteeing that no one will be happy with almost all of it.”
The greatest issue with any debt crisis is that when the proverbial bubble pops, a self-reinforcing contraction starts, and the problems spread very quickly. Hopefully the environment does evolve into this state.
What will happen today?
Last night the foreign markets were up. London was up 0.22%, Paris up 0.28% and Frankfurt up 0.21%. China was up 0.52%, Japan up 0.01% and Hang Seng down 0.67%.
Futures are flat. Gold almost eclipsed the $4,000 oz level on the growing political crisis is France and the government shutdown in the US. The 10-year is off 5/32 to yield 4.17%.
