Debt Ceiling Avoided – Cue the new rally

The U.S. politicians were finally forced to walk the same path in a hollywood style finale to the government shutdown.  And, no sooner is the accord signed the U.S. markets rally to new all time highs.  That is particularly impressive since none of the fundamental underlying problems of the U.S. economy have been tackled.

But what are those fundamental problems?  One could suggest that the politicians are the single thing standing in the way of America’s recovery.  Or is it the structure in which the politicians operate and the power of the conglomerate lobby that funds them.

Meanwhile, business is doing well. Global titans like Apple (APPL), Exxon Mobil (XON), Google (GOOG), Johnson & Johnson (JNJ) and General Electric (GE) come out of this skirmish unscathed and ready for more growth.

Fundamental reforms are required in the healthcare system to ensure that the costs of healthcare are bought down to reasonable levels.  The provision of universal healthcare to the citizens of the worlds “richest” nation (Obamacare) should not cost the government so much that it’s politcal opponents needs to risk a shutdown and potential ruining of the reputation of the U.S.A.  This in tunr will affect it’s cheap cost of debt financing. because it is exactly the increased risk of repayment of its debt that could cause serious problems for our cousins in the U.S.

It is this issue that is rasing it’s head according to Bloomberg today “U.S. borrowing costs have climbed faster than the rest of the world since May, with the gap narrowing by 0.24 percentage point on speculation the economy was growing enough to allow the Fed to start curtailing its unprecedented stimulus”. Bloomberg

You can only play the bravado cowboy so many times before it catches up with you.  While the technological innovation and business strength of the U.S. continues to be stable and grow, there are some markets that require regulation such as healthcare (see the European Models) and Finance.  Without these reforms and strong leadership there will be many more twists in this path.


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