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USA back from the brink

Late on October 16th, the global markets breathed a collective sigh of relief, as America, at literally the eleventh hour, pulled back from the edge of their ‘fiscal cliff’ and Congress finally agreed the deal to raise the federal debt ceiling of $16.7 trillion (£10.5 trillion) and allow the government to open shop again.

It was still a close run thing, with the Democrat-led Senate voting 81 to 18 for and the Republican-led House of Representatives voting 285 to 144 for.

This vote allowed the US Treasury to extend its borrowing until February 7th 2014 and directly fund the Government until January 15th 2014.

The bill confirming this was signed by President Obama early on October 17th, just hours before possible financial meltdown. He followed this by stating we’ve got to “earn back the trust of the American people”. He went on to add: “We’ve got to get out of the habit of governing by crisis. “My hope and expectation is everybody has learned there’s no reason why we can’t work on the issues at hand, why we can’t disagree between the parties without still being agreeable and make sure that we’re not inflicting harm on American people…”

Given that the US dollar is by far the most widely held reserve currency across the world and trillions of dollars of US Treasuries are held by investors and foreign governments, the thought of a default on these would have sent massive shock waves across the global financial markets and would have threatened sending the world into recession again.

The game of political brinkmanship, which effectively closed the country’s civil service for 16 days, has had a serious impact on the US economy, with economists estimating that the partial government shutdown that ensued has given the American economy a $24bn negative hit to its GDP.

Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 – Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.

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