With budget funding secured to cover expenditure for the Federal government until mid-January, the remainder of the 800000 government workers who had been “furloughed” since the beginning of the month have now returned to work. The cost of the shutdown has yet to be properly evaluated, but it was suggested that each day of idleness cost the American nation $300 000 000.
The consequences of America’s latest bout of self-harm have yet to be counted, but analysts expect that the shutdown will damage the Q4 growth figure. According to an article in Time, the ratings agency Standard and Poor’s estimates that the shutdown cost the US economy some $1.5 billion per day and that it will drop the GDP figure by 0.6% from their estimate of 3%.
The agreements of Thursday morning have not resolved either the budget crisis or the question of raising the debt ceiling sufficiently to cover US borrowing needs over the longer term – that agreement will expire in February. What may have happened is that any whisper that the Federal Reserve may be about to enter the “Taper” when the $85 billion monthly asset purchase programme is scaled back (forward guidance statements notwithstanding) has been quelled for the time being. Rumours that the support is to be withdrawn sooner rather than later have the effect of hitting stocks in emerging markets, pushing up the yield on US Treasury bonds and, perversely, sending the Dollar higher. The effects have been transitory and quickly reversed when the rumours are seen to be baseless. However, at some stage, the support must be withdrawn, but the recent financial debacle in the House of Congress has probably pushed that date backwards.
One Republican Congressman, Mo Brooks, underlined the fact that the solution to the financial standoff has yet to be cemented. In comments to the Associated Press Mr Brooks said: "We need to get to the underlying cause of the problem, which is our out-of-control spending and deficits and fix it before it's too late and we go down the toilet to bankruptcy. Because that's where America is headed." Naturally, precipitating a sovereign default is the obvious way to avoid such a scenario – oh, hold on... Leaving the final word to the President, Mr Obama suggested that the conservative wing of the Republican Party that had triggered the crisis should "Go out there and win an election". 2014 will see mid-term elections and will afford the American public a chance to give their verdict on the behaviour of their lawmakers – some of them, at least.