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8 Oct 2013
Is the US crisis a national delusion?
FXstreet.com (Chicago) – The US shutdown started almost a week ago when republicans, led by House Speaker John Boehner and democrats, led by Senate Majority Leader Harry Reid blocked themselves mostly due to the implications of the administration’s willingness to pass the healthcare legislation called Obamacare. Failing to come to an agreement before the beginning of October to present a budget, federal funding was cut off at the beginning of a new fiscal year – note: military spending was not stopped.
While it may seem like another political fanfare or a serious effort to come to terms from both sides, what matters most at this point is how much time there is left before the hard deadline for the US debt ceiling hits the country: October 19th. Although government spending triggered the shutdown, rumors spread on potential global repercussions if the US fails to honors its financial obligations and the country's impossibility to perform a "comeback" afterwards.
Charles Mackay noted on his book Extraordinary Popular Delusions and the Madness of Crowds that "We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first." Recent losses in financial markets in the US indicate the potential existence of concern about what is going on with Washington. But although facts prove the decline of value in equities, a stronger reaction may have not been felt yet. In the words of Council Economic Advisers Chairman Jason Furman "Analysts predict that markets may not start hitting the panic button until next week, when Congress is days away from Oct. 17 and still without a deal."
Politico, newsletter, notes market participants are focusing their attention to those who have the power of vote, in other words, Congress and the House. But either way, neither Obama nor Boehner have given in their strong political perspectives. The same applies for republicans. Although the crisis could last longer or a few days, the message the country is sending to the world is quite clear and the country itself is running out of time.
While it may seem like another political fanfare or a serious effort to come to terms from both sides, what matters most at this point is how much time there is left before the hard deadline for the US debt ceiling hits the country: October 19th. Although government spending triggered the shutdown, rumors spread on potential global repercussions if the US fails to honors its financial obligations and the country's impossibility to perform a "comeback" afterwards.
Charles Mackay noted on his book Extraordinary Popular Delusions and the Madness of Crowds that "We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first." Recent losses in financial markets in the US indicate the potential existence of concern about what is going on with Washington. But although facts prove the decline of value in equities, a stronger reaction may have not been felt yet. In the words of Council Economic Advisers Chairman Jason Furman "Analysts predict that markets may not start hitting the panic button until next week, when Congress is days away from Oct. 17 and still without a deal."
Politico, newsletter, notes market participants are focusing their attention to those who have the power of vote, in other words, Congress and the House. But either way, neither Obama nor Boehner have given in their strong political perspectives. The same applies for republicans. Although the crisis could last longer or a few days, the message the country is sending to the world is quite clear and the country itself is running out of time.