After the US government had been shutdown for over 2 weeks, Senate leaders were finally ble to come to an agreement on both the budget and the debt ceiling. Even though the government is likely going to fully reopen as early as tomorrow, both deals are temporary to say the least.
Regardless, the fact that a deal was struck in the waning hours before the debt ceiling was reached and borrowing by the US government ceased resulted in a surge forward by most markets.
The Shutdown is shutdown
For the past two weeks, we witnessed a strong feeling of investor anxiety as the US government’s partial shutdown was quickly approaching the debt ceiling deadline. With Congressional leaders and the President more or less sitting on their hands, it seemed increasingly likely that the US would not pass a budget or raise the debt ceiling before the October 17th deadline when the US would begin to default on its loan obligations.
Now, just one day before the debt ceiling deadline, deals in regards to the debt ceiling and the budget have been reached. In terms of the budget, Congressional leaders on both the Republican and Democratic side agreed on a budget that is able to fully fund government operations until mid-January. It is a pleasure to hear that some progress was made, but what this story really tells us is that we may be forced to witness another government shutdown much like this one only a few months down the road. The hope is, however, that in the next 3 months or so Democrats and Republicans can figure out a long-term budget that is suitable for everyone involved.
As far as the debt ceiling is concerned, kitco is reporting that it was raised in order to allow the US to borrow until February 7th. This deal presents the same as the first in that, a few months down the road, we stand the very real chance of witnessing another Congressional dilemma much like the one we have experienced thus far in October.
Gold and silver have responded positively to the deals being reached by Congress and in the early parts of Wednesday have both made modest gains.