American Circus

Americans love a show, especially a political one. For almost three weeks, they tried to make us believe that the U.S. would end up in a technical default scenario and that it would be a serious blow to the world economy. The actors in Congress, Democrats and Republicans, knew their roles perfectly well: Over the past half century, the U.S. government has raised the debt limit more than 70 times and almost every time, heated arguments about how and when the world’s largest economy will begin to live within its means have accompanied it.

The performance went splendidly: Salvation came a matter of hours before the deadline. With a vote of 285 to 144, the House of Representatives approved the bill, which raises the debt ceiling until Feb. 7 and renews funding for federal agencies until Jan. 15, 2014. U.S. President Barack Obama signed the bill immediately.

At first glance, the repercussions of the fiscal crisis are no less tangible than during the 2011 crisis, when the U.S. lost its top-tier credit rating with Standard & Poor’s. Because of the forced shutdown of federal agencies alone, the U.S. economy has now lost $3.1 billion, as calculated by analysts at IHS Global Insight. Then there are the indirect losses. For example, hundreds of breweries were unable to obtain licenses to start production or launch new brands of beer on schedule because employees of the Alcohol and Tobacco Tax and Trade Bureau had been furloughed. All in all, the U.S. economy may lose up to $24 billion, Standard & Poor’s finds. This threatens to lower the country’s gross domestic product growth by 0.6 percentage points to 1.6 percent in the fourth quarter.

However, looking at the reaction of the markets, it becomes clear that the majority of investors did not truly believe — and will not believe — in a U.S. default. It is no accident that over the three weeks of the crisis the S&P 500 rose 2.38 percent. Of course, the yield on short-term U.S. bonds soared, with the yield on one-month bonds, for example, reaching its highest level since 2008. However, this is the usual play on fears. The yield on two-year bonds, for example, on the contrary, dropped to its Sept. 30 level the day before the eleventh hour. In the medium term, markets are more affected by the state of the real economy, and here, the outlook is still good. According to the white paper published Wednesday by the Federal Reserve, the U.S. economy demonstrated moderate growth in the last six weeks, mainly thanks to the recovery of the auto industry and housing market, and to a lesser extent because of growth in consumer spending and production. Furthermore, rumors have emerged that the Fed might put off tapering its stimulus program until the beginning of next year.

Against this background, the traditional battles between Democrats and Republicans about where to obtain the money are not really so scary. It is clear to everyone that they will bicker and make headlines. The U.S. no longer knows any other way than living on credit. A debt of $16.7 trillion is a pyramid scheme that can only grow. Alternatives to the dollar as the world’s reserve currency cannot be found, and let the principal holders of U.S. debt, China and Japan, not be concerned.

One can only be happy for Obama: He did not let Republicans make substantial amendments to the universal health insurance program, “Obamacare,” which is one of his most important accomplishments as president. The Grand Old Party haggled to the end but nevertheless gave in. The failure is doubly insulting since, according to public opinion polls, the majority of Americans think the “elephants” are namely to blame for the three-week fiscal crisis. Then again, Republicans still have a chance to recoup their losses: By Dec. 13, Congress must agree on a budget. The problem did not go away — they simply postponed its resolution. The show goes on.