What does the US Government Shutdown mean for the economy

October 1, 2013

The Government shutdown means that from tomorrow government employees would not be paid for work or would have to work without pay in some cases for an indefinite time.

This means a lot of hardships for their families. Though President Obama has signed a law confirming that citizens on military duty will be paid their salaries and will continue to be on duty.

Nevertheless, what this means for the economy is that the spending power of the consumer is going to go down and so is the investor confidence. Thought the real impact of this shutdown will depend on the time for which the shutdown happens. The longer it stays the worse it is going to get. Businesses are going to shrink as the consumer spending power goes down, companies will stop new investment plans and hiring plans and this spiral will begin. This may potentially slash off some GDP points from the economy.

Now, what makes it more scary is the timing. This is because of the overlooming debt ceiling issue. When the debt ceiling will be reached is a difficult question to answer. However, according to predictions, its going to be somewhere between the October 18 to November 5 period.

If both these issues are not handled with care, it could have huge recessionary impacts on the US economy.

What it means for various US services :

http://www.deccanchronicle.com/131001/news-world/article/us-government-shutdown-what-it-means

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A view point on current run for emerging nations currencies

September 9, 2013
  1. Popular view : US QE tapering
  2. Contrary view : Shrink in consumption, leading to lower exports and hence, higher CAD. Eurozone is now running an overall surplus in CAD. They have run austerity measures and hence, the demand in the Eurozone has shrunk.

This post is in continuation to the post : https://sayantansays.wordpress.com/2013/08/26/reasons-why-the-ruppee-is-falling-against-the-dollar/