Are we going into another round of political brinksmanship?
It sure looks like it. With Congress divided and the debt-ceiling deadline, government funding deadline, Fed taper target, and new Fed Chair decision all coming due, it seems like we’re headed for volatile times. To be sure, these are important issues: monetary policy helps determine interest rates, which in turn are key to the value to all financial assets. Government spending constitutes over 20% of the economy; shutting it off suddenly would be highly disruptive. And if we don’t expand the debt ceiling, the US could default–a disastrous possibility that no one really wants to contemplate.
But we’ve seen this movie before, and it’s a snoozer. The difference between Larry Summers and Janet Yellen is one of style, not substance. The institution of the Fed Chair is far bigger than any man or woman who sits there. Fed policy is dependent on the economy, which is gradually strengthening. And fiscal and financial policy have been in flux ever since the Republicans took the House in 2010. Divided government is something Americans do–like eating hot dogs or buying junk food. It may not be good for us, but it won’t kill us right away, either.
So don’t get all lathered up over the latest Congressional brouhaha. Chances are, it’s just some politician hoping for a headline.
Douglas R. Tengdin, CFA
Chief Investment Officer