Tuesday, 15 October 2013

Implications of US Government Shutdown

Democrats and Republicans are busy in a power tussle over the condition to drop/sustain President Obama’s healthcare reforms in the shape of Obamacare. The ultimate sufferers are not just the 800,000 employees out of the total 2.8 million government employees but the whole nation. Smithsonian Institutions (19 museums, 9 research centres, National Zoo and National Parks) are closed in the wake of this financial crisis engulfing, the otherwise prosperous nation. Fortunately the Federal Reserve, Department of Defense, Air traffic control, Department of Homeland Security and Justice Department are among the many exceptional sections that will see no disruptions.

According to the Goldman Sachs report, a three week shutdown could shave as much as 0.9% of the US GDP this year. Now, certainly this is a cause of concern which cannot be avoided irrespective of the struggle to show off the dominance by both the political parties in the Congress to each other.

October 17 – The deadline which if crossed, would lead to the financial risk of default in debt payment by the US Government. This implies that the upcoming days are not the good days for the world economy to enjoy sunshine on the beach of ‘return on investment’ ocean. The dark clouds of financial risks have engulfed the city of ‘World Economy’ from the western direction. Weathermen (world economists) are keeping a close look at the possible storm, forming in the western coast of the city. The storm may cool down a little if the ceiling limit of the debt by the US Government is raised before the deadline.

Investors around the globe, who were smiling incessantly over the last few months when the outgoing Fed Reserve Chairman- ‘Ben Bernanke’ assured higher rate of returns through their investment in the gilt-edged securities (US Treasury Bonds) are now on a verge of shedding tears as their investments will be at risk. These include countries like Japan, China and India who are possessing nearly $1.135 trillion, $1.277 trillion and $59.1 billion US Treasury bonds respectively.

On the diplomatic front too, United States is getting harmed, as in the wake of the shutdown, President Obama had to cancel two important Asian visits (Philippines and Malaysia), that gave a strong prospect to the Chinese President Xi Jinping to avail the benefits of the geopolitically important Southeast Asia Summit in Malaysia. Chinese President is the star of the summit now which Obama would have been, if there was no financial crisis at home.

There are some serious questions being raised in hush voices over the ability of United States to lead the world from front, if it cannot even pass a budget bill of their own country. There is not even a single year since 1997, in which there was a smooth passage of the budget. Who is at fault - the presidential style democratic system of the country or the dominance of political interests over national interests by the two political parties of the country?

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