Unbelievable as it may seem, US politicians seem determined to derail the nascent and weak recovery in the US. The two sides of the political spectrum are so far apart that I can't see how they will resolve the budget and debt ceiling issues before tonight and the 17th respectively. Republicans believe that because they control one of the US legislative chambers they have a mandate to effectively try to repeal Obamacare. Democrats believe that because they have the other chamber and the presidency they have a mandate to tell the Republicans to get stuffed.
To the non-American world, it is quite astounding that it could come to this. How can a budget system allow one side to tie defunding of already passed legislation to a budget? How can a constitution allow that to happen?
Anyway, leaving the lunacy of the American political system aside, a shutdown of government and potentially a technical default on treasuries loom. While the default may be purely technical, it will cause havoc in the repo market, and knock on to other markets very quickly. It will ultimately get resolved of course, but in the meantime it can't help the US economy, and that is still 25% of the global economy.
Stocks to fall, $ to fall, bonds to rise (except defaulted treasuries of course)..... everywhere.
