U.S. Federal Shutdown Breaks Record: A Global Shock Caused by a Political Standoff

When "the U.S. government runs out of money" turns from a warning into reality, this ongoing 35-day federal shutdown is evolving into a storm that sweeps the globe. As of November 5, the U.S. federal government shutdown has matched the longest record in history, and the renewed rejection of the Senate appropriations bill means that this crisis is still continuing to fester. From Wall Street to ordinary investors, global markets are paying the price for this political deadlock.

1. The Chain Reaction of Government Shutdown: From Livelihood Crisis to National Functional Paralysis

This shutdown has far exceeded the realm of a "political farce" and is causing substantial harm to the functioning of American society.

The livelihood sector is the first to be affected.
Among the 800,000 federal employees, 35% are forced to work without pay or take mandatory leave. TSA security personnel are taking leave in large numbers due to the inability to afford commuting costs, resulting in the closure of security checkpoints at more than 20 airports across the country; the CDC's flu monitoring program has been interrupted, causing hospitals to lose their basis for epidemic assessment; the USDA's food testing has stalled, with over 12,000 batches of food stranded on the production line, creating gaps in the food safety defense.

National projects have come to a complete standstill.
In terms of infrastructure, maintenance projects for 230 highways across the United States have been suspended, including the California State Route 10 bridge reinforcement project, which has been flagged as "having safety hazards." In the field of scientific research, the NASA Mars exploration team is on leave, and data from the "Perseverance" rover is being left unprocessed. International aid has also been affected, with military assistance to Ukraine and food aid projects to Africa both being put on hold.

Regulatory vacuum poses hidden dangers
The SEC's stagnation in IPO reviews has caused the listing plans of 37 companies to be shelved; the FDA has stalled the approval of 6 new cancer drugs; the EPA's national environmental monitoring network has come to a halt, allowing some factories to illegally discharge pollutants. These regulatory gaps are laying greater hidden dangers for the future.

II. The Game of Interests Behind the Political Stalemate

The disagreement between the two parties over the allocation of the $60 billion budget is essentially a naked display of electoral politics.

The Democratic Party insists on investing funds in livelihood and climate projects, while the Republican Party demands strengthening national defense and border security. Both sides use the government shutdown as a political bargaining chip, and former President Trump's "no compromise" stance further complicates the situation. This approach, which sacrifices the operation of the nation for electoral gains, has plunged American politics into a vicious cycle.

It is worth noting that this shutdown occurs against the backdrop of federal debt surpassing $37 trillion and a debt-to-GDP ratio of 132%. The Treasury is forced to issue a large amount of short-term government bonds to maintain operations, and this "robbing Peter to pay Paul" operation is pushing the United States to the brink of a "technical default."

3. The Domino Effect of the Global Market

As the world's largest economy, the U.S. government shutdown is causing significant spillover effects.

Financial market liquidity crisis
The Ministry of Finance issued $1.2 trillion in short-term government bonds to maintain operations, equivalent to withdrawing the same amount of liquidity from global markets. The scale of the Federal Reserve's overnight reverse repos plummeted, and the cost of dollar financing rose to a new high since 2020, triggering a return of global funds from emerging markets.

The risk of supply chain disruption is increasing.
The automotive industry is facing delays in the clearance of components due to the stagnation of import tariff reviews; technology companies are unable to obtain export licenses, affecting the global chip supply; the interruption of agricultural product export certifications is disrupting the global food trade order. These chain reactions are reshaping the global supply chain landscape.

The wealth of ordinary investors has shrunk.
The S&P 500 Index has dropped over 7% from its October high, Bitcoin has fallen by 18%, and traditional safe-haven assets like gold have also been affected. Cross-border trade companies are facing dual pressure from exchange rate fluctuations, significantly increasing the difficulty of asset allocation.

4. When will the crisis bottom out? How should investors respond?

Currently, neither party has shown a willingness to compromise. Estimates indicate that for every week the government is shut down, GDP growth will be reduced by 0.15 percentage points. If this continues until the end of November, the U.S. economy may face significant recession risks.

What is even more concerning is that the interest payments on U.S. debt have surpassed defense spending, becoming the second-largest federal expenditure. If a technical default occurs, its impact will far exceed that of the 2008 financial crisis.

Investors should remain cautious at this time.

· Control the position of risk assets and retain sufficient cash.
· Diversify allocation through low-risk assets such as gold ETFs and government bond funds
· Closely monitor the TGA account balance of the U.S. Treasury and the progress of bipartisan negotiations.

The crisis triggered by political gamesmanship has become a touchstone for testing the resilience of the global financial system. In this era where uncertainty has become the new normal, maintaining rationality and vigilance is more important than pursuing returns.