Bill Gross: Is a Category Five Storm Brewing in Washington?
It’s day two of the partial government shutdown in the United States and the markets appear to be pricing in the pain. Equities, which advanced on Tuesday, sweat value on Wednesday as political trench warfare raged on in Washington.
Although the shutdown itself is embarrassing and costly — IHS estimates that it costs about $300 million per day to keep the lights off, shaving between 0.1 and 0.2 percentage points off GDP growth per week — it is really the threat of federal default that has turned the laughable incompetence of policymakers into a sobering threat to the U.S. economy.
Every day policymakers fail to act, what can politely be called the budget impasse comes closer to dovetailing with the expiration of the extraordinary funding measures that the U.S. Treasury is currently employing in order to satisfy the country’s financial obligations. These measures, enacted after the U.S. hit the debt ceiling in May, are expected to expire sometime in the next couple of weeks.