The Foreseeable Impacts of an Agreement On the Fiscal Cliff

Published in La Presse
(Canada) on 27 December 2012
by Paul Durivage (link to originallink to original)
Translated from by Malina McLennan. Edited by Keturah Hetrick.
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.


Selon la National Bank of Australia, les États-Unis ont 50% de chances de mettre sur pied une solution temporaire, 30% de chances de se buter au «mur fiscal», et 20% de chances de conclure un accord « sérieux » de long terme d’ici lundi prochain.

Quelles seraient les conséquences sur les marchés d’un accord avant l’échéance fatidique ? Voici quelques pistes glanées ici et là.

Un accord avant la fin de l’année, quelle que soit l’ampleur des concessions, profiterait certainement aux marchés boursiers, qui pataugent dans le rouge depuis une semaine, en redonnant de la visibilité du côté des dépenses publiques et des revenus disponibles des ménages. Au contraire, l’entrée en vigueur automatique des mesures d’austérité prévues pour le premier janvier provoquera une récession, craignent la plupart des économistes, ce qui est de mauvais augure pour le marché des actions qui a tout de même progressé au-delà des attentes cette année.

Le dollar américain profiterait aussi à coup sûr d’un contrôle des dépenses gouvernementales, face à l’euro, selon les cambistes. Pour le moment, c’est le dollar canadien qui marque des points contre le billet vert.

Si démocrates et républicains parviennent à trouver un terrain d’entente, «cela jouera en faveur des prix du baril de pétrole, car le risque de récession s’éloignera», a souligné James Williams, de WTRG Economics. Les États-Unis, rappelle-t-on, sont le premier consommateur mondial d’énergie.

«Une entente signifierait un contrôle des dépenses, et çà c’est très positif pour l’or», de souligner pour sa part Frank McGhee, chef négociateur pour la firme Integrated Brokerage Services LLC à Chicago.

Les taux d’intérêt sur les titres gouvernementaux sont aussi en jeu. L’agence de notation chinoise Dagong a placé mardi la note des emprunts souverains américains sous surveillance négative. Si celle-ci devait être dégradée une nouvelle fois, elle se retrouverait avec une note inférieure à celle de la Russie. Pékin est le principal détenteur de bons du Trésor américain.
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