It’s almost like investors are not particularly worried by the great behemoth of government temporarily stalling.
Global investors reacted calmly on Tuesday as the government shut down in Washington, with Wall Street stocks opening slightly higher.
But how can they be calm when the government is shutting down?
The dispute has raised the prospect that federal agencies will run out of money Tuesday, causing 800,000 federal workers to be furloughed and more than a million others to work without pay.
So we’ll actually save money.
On Wall Street, the Standard & Poor’s 500-stock index added 0.4 percent in early trading, and the Dow Jones industrial average rose 0.2 percent.
The Treasury Department has estimated that it will no longer be able to issue new bonds after Oct. 17 without authorization from Congress. Several Tea Party Republicans have said they will not agree to lift the so-called debt ceiling without the White House making several compromises — something the White House has said it will refuse to do. If there is no agreement, the government would be forced to immediately operate on a balanced budget and could default on its debt — something that has never happened before.
That last sentence says it all. Maybe Obama can take a break from fundraising for his OFA SuperPAC and begin fundraising for his own debt.
If the government did stop paying interest on its outstanding bonds, those bonds would most likely become less attractive. But investors responded in unexpected ways the last time the government approached the debt ceiling in 2011. Back then, investors flocked to Treasury bonds as a safe haven, despite the fact that the turmoil was caused by concern about the future of those same bonds.
So what they’re saying is that rains of toads will fall from the sky and cats and dogs will begin living together.
Some of the complacency on Wall Street about the shutdown has come from the history of market movements in the past. The precedent is not all that frightening, according to data put together by Joseph P. Quinlan, chief market strategist at U.S. Trust, Bank of America Private Wealth Management. When the government closed for 21 days in late 1995, for instance, the S.& P. 500 actually rose 0.1 percent during the shutdown.
Maybe if the government stays shut down long enough, the economy can actually recover.