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Sat Dec 22, 2018, 06:20 PM

Bloomberg - Wall Street's Debt-Ceiling Dread Resurrected by Shutdown Strife

This is part of the reason why it is so important for Democrats to stand firm. If Trump gets his blank check on the wall, then who knows what other type of extortionate demands he will attach to increasing the debt limit.


The looming U.S. government shutdown is beginning to worry Wall Street. Just not for the reasons you might think.

Traders aren’t really losing much sleep over the prospect of furloughed bureaucrats inside the Beltway. Instead, market veterans are on edge because of what the debacle signals about Washington’s inability to compromise ahead of the early March debt-ceiling reinstatement, after which the Treasury will need to resort to extraordinary measures to pay America’s obligations.

In what’s become something of a grim ritual, lawmakers from both sides of the aisle are likely to lock horns once again as the clock to a U.S. debt default ticks down, using the threat of economic disaster to try and wrangle legislative concessions from the other party. While Congress has never failed to reach an accord, many longtime Wall Street prognosticators are growing increasingly concerned that 2019’s clash could match, or surpass, some of the more bitter showdowns of years past, leading to a major market disruption.

“This shutdown episode is important because it’s a window into the governing dynamics next year, which is concerning because the debt limit comes back into play,” said Isaac Boltansky, a senior policy analyst at investment advisory firm Compass Point. “Legislative brinkmanship takes on a whole new market dynamic when it encompasses the debt ceiling. We are going to have a concentration of political risks that investors need to be aware of.”

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