Wednesday, 2 October 2013

Out of Service: Federal Government Enters Shutdown Zone

Ralph Shell, Excel Analyst

Out of Service: Federal Governement Enters Shutdown Zone If almost all of these accounting types are taught about the same kinds of accounting rules and principles, how do we get so many different answers to the results of a government shut down?  One of the featured stories this week claimed that the US economy would lose $300M each day the government was shut down.

So how does this compute?  Some time in 2009, when we had $9T deficit which has grown to close to a $17T deficit, with the government open.  Does this mean the Keynesian spend-and-get rich plan does not work, or have we merely failed to prefect it?  We had the government open and the deficit sky rockets but close the government and they claim the economy tanks.

Both the US and the EU are subjected to risk of a change in the political atmosphere later this week.  Reading the tea leaves, is it the euro or the USD that is more vulnerable to a rally?  From the most recent COT report, we know the specs have loaded up on the long side of the euro.

Click to Enlarge AUDCAD Daily Currency Chart

Still, the economic numbers released Tuesday continue to show the European recovery remains quite weak.  No new stimulants are expected at the ECB meeting but observers expect to hear a dovish Draghi.

In Washington, the combatants seem to have the energy to go a few more rounds.

Perhaps in the wake of the economic destruction at the Canadian border, the loonie will lose to a like-minded commodity currency - the AUD, located far from North America.
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