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Even More Thought on the Government Shutdown

See also the October 3, 2013, October 4, 2013, and October 5, 2013 Growls for previous comments.

In an op-ed that is well-worth reading in its entirety in the weekend Wall Street Journal, Niall Ferguson writes that the federal government shutdown this week "is a sideshow." Rather, he argues that "debt is the threat." saying essentially, "An entitlement-driven disaster looms for America, yet Washington persists with its game of Russian roulette."

Following is the lede from the op-ed:

"In the words of a veteran investor, watching the U.S. bond market today is like sitting in a packed theater and smelling smoke. You look around for signs of other nervous sniffers. But everyone else seems oblivious.

"Yes, the federal government shut down this week . . . .

And here's how he summarizes the op-ed:

"Anyone watching this week's political shenanigans in Washington will grasp at once the tiny probability of tax hikes or spending cuts on this scale.

"It should now be clear that what we are watching in Washington is not a comedy but a game of Russian roulette with the federal government's creditworthiness. So long as the Federal Reserve continues with the policies of near-zero interest rates and quantitative easing, the gun will likely continue to fire blanks. After all, Fed purchases of Treasurys, if continued at their current level until the end of the year, will account for three quarters of new government borrowing.

"But the mere prospect of a taper, beginning in late May, was already enough to raise long-term interest rates by more than 100 basis points. Fact (according to data in the latest "Economic Report of the President"): More than half the federal debt in public hands is held by foreigners. Fact: Just under a third of the debt has a maturity of less than a year.

"Hey, does anyone else smell something burning?"

Kudos for an op-ed that readers are likely to forward to family and friends.

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