We’re nearing another Shutdown Theater event where people pretend the government “shutting down” will result in disaster and both “sides” engaging in brinkmanship gaming. Prediction markets indicate that it’s likely we get a shutdown at midnight tonight. The stock market has shrugged and indicated it doesn’t care. Fiat economists are threatening that each day the government is “closed” will cost x% of GDP this quarter. For the nth time, I remind everyone that wasteful government spending does add to GDP the way the US government calculates it, but is not real production. I’ve written about these Shutdown Theater events in the past and stand by my previous analysis that this event won’t be a market event either:
Government Shutdown – Does Anyone in Washington DC Know What They’re Doing?
It’s possible that both sides come to an agreement late tonight. With President Trump saying that even talking with Democrats is a waste of time and Democratic fundraisers trying to convince Senator Schumer to avoid agreement at all costs and shut down the government, I agree with the prediction markets that a shutdown is more likely than not.
If we do get a shutdown, they tend to last a short time and may lead to inconvenience for some. As noted in the above linked article, shutdowns do not lead to re-establishment of colonial rule by an invading British army, cancelling of US debt leading to economic collapse, or closure of hospital emergency departments leading to mass deaths.
Eventually, both sides will agree on some deal that as always, will lead to the government spending even more than they did the previous year. Because we now finance overspending through trillions of dollars of debt issuance each year, that will lead to citizens paying for this spending through inflation and reduced long-term investment and slower growth.
I don’t like this, but can’t stop it. So, instead of complaining, I’m going to ignore the partisan bickering, do my job, and ensure my portfolio is prepared for higher long-term inflation. If you want help with that, feel free to reach out – it’s what we do every day.
IR@DeepKnowledgeInvesting.com if you have any questions.
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