ROUBINI: Investors Are Underestimating The Republican 'Jihad' Against Spending

RoubiniAP imagesNouriel Roubini

September promises to be
one hell of a monthfor the global economy.

Congress comes back from vacation this month to a full plate of fiscal time bombs that will need to be defused in a very short period of time.

This is a fight that Americans have gotten used to in recent years.

But economist Nouriel Roubini warns that investors are becoming too complacent. In a new piece for Project Syndicate, offers an interesting metaphor to describe the Republican party’s stance on the budget:

… yet another partisan struggle over America’s debt ceiling could increase the risk of a government shutdown if the Republican-controlled House of Representatives and President Barack Obama and his Democratic allies cannot agree on a budget.

…So far, investors have been complacent about the risks posed by the looming budget fight. They believe that — as in the past — the fiscal showdown will end with a midnight compromise that avoids both default and a government shutdown. But investors seem to underestimate how dysfunctional US national politics has become. With a majority of the Republican Party on a jihad against government spending, fiscal explosions this autumn cannot be ruled out.

Read Roubini’s whole piece at Project-Syndicate.

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