The Foreseeable Impacts of an Agreement On the Fiscal Cliff
According to the National Bank of Australia, the United States has a 50 percent chance of coming to a temporary solution, a 30 percent chance of the fiscal cliff being disastrous and a 20 percent chance of coming to a “serious” long-term solution next Monday.
What would happen to the market if they reached a solution before the fateful deadline? Here are a few possibilities.
If an agreement is reached before the new year, whatever the amount of concessions made, it would certainly profit the stock market, which has been unsteadily approaching red for over a week. It would also clarify the details of public spending and household disposal income. On the other hand, entering into the austerity measures planned for Jan. 1 would, according to economists, provoke a recession, which would have a negative effect on the stock market — a market that still managed to surpass expectations this year.
According to some brokers, the American dollar would also profit from more decisive controlling of government spending, especially in comparison to the euro. For the moment, the Canadian dollar is being used as a point of reference against the currency.
If the Democrats and the Republicans manage to find common ground, it will work in favor of lowering oil prices, “as the chances for recession decrease,” according to James Williams of WTRG Economics. It should be noted that the U.S. is the world’s largest consumer of energy.
“A settlement would mean control over spending, and that would be very positive for gold,”* underlined Frank McGhee, head negotiator for Integrated Brokerage Services LLC in Chicago.
The interest rate on government property is also in danger. On Tuesday, the Chinese credit rating agency Dagong placed American sovereign debt under negative surveillance. If their credit rating were to be reduced once again, it would be inferior to Russia’s. Beijing is the main holder of the bonds of the American treasury.
Editor's Note: This quote could not be verified.
What would happen to the market if they reached a solution before the fateful deadline? Here are a few possibilities.
If an agreement is reached before the new year, whatever the amount of concessions made, it would certainly profit the stock market, which has been unsteadily approaching red for over a week. It would also clarify the details of public spending and household disposal income. On the other hand, entering into the austerity measures planned for Jan. 1 would, according to economists, provoke a recession, which would have a negative effect on the stock market — a market that still managed to surpass expectations this year.
According to some brokers, the American dollar would also profit from more decisive controlling of government spending, especially in comparison to the euro. For the moment, the Canadian dollar is being used as a point of reference against the currency.
If the Democrats and the Republicans manage to find common ground, it will work in favor of lowering oil prices, “as the chances for recession decrease,” according to James Williams of WTRG Economics. It should be noted that the U.S. is the world’s largest consumer of energy.
“A settlement would mean control over spending, and that would be very positive for gold,”* underlined Frank McGhee, head negotiator for Integrated Brokerage Services LLC in Chicago.
The interest rate on government property is also in danger. On Tuesday, the Chinese credit rating agency Dagong placed American sovereign debt under negative surveillance. If their credit rating were to be reduced once again, it would be inferior to Russia’s. Beijing is the main holder of the bonds of the American treasury.
Editor's Note: This quote could not be verified.