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40% odds of a U.S. shutdown and default: Analyst

Tuesday, September 24, 2013 - 03:00

Guggenheim Partners analyst Chris Krueger says a government shutdown, however messy and disruptive, may be the only way to avoid a far worse U.S. default when the debt ceiling is reached in mid-October.

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We continue to place a 40% probability that will be a government shut down October 1 as well as a 40% probability on US entering into. Technical default scenario -- towards the end of October early November. One of the main reasons were we're at 40% which a lot of people believe this -- is that the proxy war over obamacare is sort of taken over the government shut down negotiations. Unfortunately there is great action on the right of the Republican Party right now. Who convinced the leadership that government shutdown. If they can. Shut off. -- Affordable Care Act also known as Obama here Obama carriers drive in the cost of health care of -- destroyed millions of American jobs. It is a -- and a half ago. So that the 40% -- which would involve a government shut down on October 1. You could see this and it grind to a halt -- sort of procedural shenanigans that that Ted Cruz and some of the real obamacare defund crowd aprilia. Started to galvanize around need simply could just run at a time. I will do everything. Necessary and anything possible. To defund obamacare that the key to keep in mind as they're two separate fights under -- here there's the fight over the continuing resolution in the government shut then there's the fight on the debt ceiling and the thinking goes is that if you're gonna if you're gonna go over one of these clips it's better to go over. The government shut down -- so perhaps. By doing that by giving the more conservative members something to hang their hat on. They'll be a little less aggressive around the debt ceiling. Quite frankly if there isn't a government shut down and and Boehner has to cut a deal with Democrats to keep the government open. That's probably -- meaner and nastier -- The most frightening aspect of the debt ceiling not as the stakes at play but that there's just no exit strategy right now and there's really no evidence to suggest. That the congress can get their act together in time to raise the -- This place. Is a mess if you remember in the summer 2011 that was a very long negotiations starting originally with Eric Cantor Joseph Biden at the White House and there was at least sort of a bid ask spread so to speak you sort of knew where you were headed and there was at least the agreement that you were going to be something. Whereas this time around the president has been insistent that he will not negotiate over the debt ceiling. And congressional Republicans are basically asking for that the tea party's greatest hits. As. As a reason to raise the debt whether it's Keystone Pipeline tax reform obamacare repeal it that are perhaps they let. They let the conservatives shut down the government to get to let that sort of pressure release in the balloon. So that the debt ceiling could be a more orderly process -- tell us you know that we we think this is a pretty depressing base case scenario where you. You're in effect saying you have to shut down the government's that you don't default.

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40% odds of a U.S. shutdown and default: Analyst

Tuesday, September 24, 2013 - 03:00

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