The Fed ponders the fractious politics of debt

FT/08-24-17

These days it is Ms Yellen who has more cause to fear political risk upsetting the bond markets. The US Congress has to raise the “debt ceiling” by late September to allow the government to continue financing itself. These occasions were bad enough when Mr Obama was president. The Republican Congress repeatedly used the threat of default to pursue its wrong-headed obsession with trying to cut spending.

Given Donald Trump’s eccentricity and his fraught relations with Mitch McConnell, the Senate leader, there is an even greater chance of chaos. Mr McConnell said this week there was “zero chance” that the debt ceiling would not be raised. But Mr Trump’s threat at his bombastic rally on Tuesday to close down the government if he did not win funding to build his Mexican wall sent shivers through debt and foreign exchange markets.

Given Donald Trump’s eccentricity and his fraught relations with Mitch McConnell, the Senate leader, there is an even greater chance of chaos…

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