How Long Will the U.S. Government Shutdown Last?

Your next video will start in

Recommended Videos

  • Info

  • Comments


Oct. 3 (Bloomberg) -- On today's "Chart Attack," Morgan Stanley's Vincent Reinhart looks at how long the U.S. government shutdown may last. He speaks on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Time for chart attack where we show you a chart that will make you smarter.

Day three of the shutdown.

Vince reinhart of morgan stanley -- economist with morgan stanley -- you done a lot of work on people's expectations of how long this will last.

We published a report three minutes after the shutdown and ask our clients to respond to a survey, and among the main questions we asked was how long they think it will last, and the answer was a wild.

46% of the people responding thought it would be more than a week.

These are your clients.

Walk us through what that actually means.

If they are concerned this will be more than a week, does that suggest a pullback in economic growth?

The link of the shutdown is self-fulfilling.

Speaker boehner will relent when enough constituent pressure builds.

The biggest source of constituent pressure is an adverse market, but if a lot of market forces think the shutdown will be a long-term, the pressure mounts more slowly, and it turns out to be a long time.

It means a bigger drag on growth, a bigger gap in the data, and most ominously, it begins to move into the debt ceiling window, and that's what investors have to be worried about.

That might be a good thing because it forces that issue.

The good thing is that speaker boehner decided to force the issue on the budget with what seemed to be the intent of if you're going to do two hard things that it's the budget first, they will roll the debt ceiling into it -- that's the good news.

The longer you take to actually get it, the closer it gets to the debt ceiling event.

We have heard some estimates that it shaves about .1% of gdp per week.

As you look at market reaction -- today, obviously, we are down 100 36 points on the dow industrial average -- how much of this has been priced in, do you think?

Credit default swaps for the u.s., it moved up some.

It's beginning to build in a premium because it crosses the event horizon.

That's one of the ironies of this whole thing.

That's exactly where you should hide, right?

That safe, short-term paper, but people suddenly want a bigger deal because they are worried they will not get the money back.

If you think about how steep the clip is, they will be dancing on the edge of it for only 10 basis points -- realistically, how do you handicap the odds of default?


There's no way the united states of america is going to default on its debt?

What we know is that of the secretary of treasury were to use only the unusual measures for which there is precedent and then starts running out of cash october 17, probably makes it to november 1, but the day the secretary is constrained by the debt ceiling and would otherwise overdraft fee account, one of three things has to give -- you either have to give to the second liberty bond act, which establishes the debt ceiling, the act that says you cannot land directly to the treasury, or the 14th amendment to the constitution.

The secretary goes into a building that has alexander hamilton's statue out in the back -- do you think he wants to be the first secretary to default?

Certainly not.

What can be done?

That 14th amendment loophole that people are talking about.

What can be done as congress could be more sensible.

That issue put first on the list . or the president or secretary says he has been given inconsistent instructions from congress.

Does constitution trump the liberty bond bag, or does the federal reserve let the treasury going to overdraft, or do they do an extraordinary measure that sets a new president -- precedent?

I know you're not a strategist, so we will just hypothesize here, but if we are looking at a selloff, if this continues on, it might be a buying opportunity, as we have seen in previous government shutdowns?

The thing about dancing on the edge of the cliff -- you could get closer before it gets better.

That's the risk associated with that.

It so good to have you here today.

This text has been automatically generated. It may not be 100% accurate.


BTV Channel Finder


ZIP is required for U.S. locations

Bloomberg Television in   change