The Dilemma of Kicking the Can

Yes, the US Government is back in normal operation. Yes, the US Government averted default in their credit obligations. Yes, the US Government unlocked its wallets for further use. Amidst these bright and promising developments, can we really expect something in the long run? Can we, as investors, traders, and observers, have a peace of mind in placing our hard-earned cash in the American market and anything exposed to the US Economy?

kick the can

To start off, I cannot think but wonder when this debt-ceiling fiasco will end. There may be a Congressional consensus, but upon closer inspection, this deal is not for the long run. The agreement only lasts until the first two months of 2014 – in the words of Richard Quest, they just kicked the can down the road. There is no concrete solution, for now, that resolves this “thing” in the long run. All that the US Congress was able to do was to buy more time to resolve this very pressing matter.

Investors and analysts are losing their patience and confidence over the US Economy and how the policymakers shape and influence the way business is done and the way money flows in and out of American entities. One ratings agency has already threatened to downgrade the United States’ AAA rating over the shenanigans that has been happening in Capitol Hill. China has also expressed its dismay over this matter when it was quoted to suggest the world should de-Americanize in order to move forward.

Investors and traders, in the practical sense, cannot really avoid United States exposure in their transactions. Being the foremost economy in the world, institutions and transactions have at least a minute exposure to the American companies and/or the government itself. This is the reason why investors, analysts, ratings agencies, other countries, observers and others concerned are really pressing the United States government to resolve with finality this issue. It may have dwindled for the meantime since there are other news-worthy matters out there, but it is guaranteed that this issue will be revived come yearend.

In the markets, especially Forex, the greenback has really suffered a big blow. Yes, there has been some bullish behavior over US$ transactions, but the steam and excitement is not there as it was before. While the dollar has been slowly picking up its lost glory in the trading floors and trading platforms, there are still concerns among investors and traders that in a way places a ceiling on how much confidence they will place over the benjamins. In asset markets, the same thing is quite observable, but in a more tempered scale.

We have seen the effects of kicking the can further down the road. And there is still this thing called tapering that is still to fully roll-out. Yes, the starting point of all the shenanigans at Capitol Hill is purely policy-based, but the ramifications and bad PR that comes with it is grossly magnified because of the influence of the US markets over the global market in general. We can all hope that come 2014, this chapter will be finished.