Neither the government shutdown nor the debt ceiling crisis are good for growth. I think the uncertainty argument has merit, plus actually failing to raise the debt ceiling would create a potentially severe economic shock.
But things could be worse. There were some aggravating monetary factors present back in 2011 that are absent today, given the Fed’s ongoing bond-buying program. MKM’s Mike Darda:
– First, QE2 came to an end in July, just as the fiasco in Washington DC was in full swing.
– Second, just as QE2 was coming to an end, the ECB catastrophically tightened monetary policy in April and July when they should have been easing it, precipitating a double dip recession and setting off a run on Spanish and Italian bond markets.