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Economic Review

11/23/2009

Will US political activities provide the next big impact on financial markets?

The US economy has been riddled with uncertainties as to the amounts of stimulus packages, bail out funds, the recipients of these funds and whether any of these liquidity injections have resulted in job creation for the sputtering economy.  These various forms of, let’s call them “support funds” have drastically increased the US deficit to alarming levels, which has taken a toll on certain financial markets such as the value of the US Dollar.  Just when TARP appears to be grinding to an end (but not yet terminated) and the pace of bail outs has been mitigated recently, another source of significant demand for deficit spending is pending, and this refers to the new “wide sweeping” healthcare reform bill currently being debated.

Although the focus of the bill is to overhaul the current US healthcare system (which does need revamping in a number of areas), the pending costs for the entire program and very questionable allocations of resources that are being introduced in the widely encompassing legislation could just provide yet another negative jolt to a US system that is in no shape to absorb such.  It is an economic situation that needs ample time to heal, stabilize and hopefully rebound.  Yes, US healthcare needs reform, however the complexity of the issue requires a less aggressive and more focused series of potential solutions to problematic areas in a structured process over a prolonged period.  International investors would like to see some fiscal discipline at this stage in the game in order to preserve and enhance the allure of the US.  Pushing a high level, fix it all, solution to such a major institution as healthcare at this time may just be met with negative ramifications from some financial markets.

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