Default or No default..?
Let’s evaluate positions of both side of the argument and see what would be the most probable outcome and finally how it could affect the markets.
How likely is to have a deal in the next 10 days?
Political Game is a Zero-Sum game!
Economy: It is a zero sum game which could lead to a negative Sum game!
Lower fiscal spending can have several effects on the economy, which can vary depending on the specific circumstances and the magnitude of the reduction. Here are some general effects of lower fiscal spending:
1. Reduced Aggregate Demand: Fiscal spending is a component of aggregate demand, which represents the total level of spending in the economy. When fiscal spending is reduced, it can lead to a decrease in overall demand for goods and services. This can result in lower economic growth, reduced business revenues, and potentially higher unemployment rates.
2. Decreased Government Services: Lower fiscal spending often translates into reduced funding for government programs and services. This can affect sectors such as education, healthcare, infrastructure, and social welfare. The quality and availability of public services may decline, impacting the well-being of citizens and overall social development.
3. Impact on Employment: Fiscal spending can directly or indirectly contribute to job creation and maintenance. Lower spending may result in fewer government-funded projects and contracts, leading to job losses in industries that rely on government spending. Additionally, reduced aggregate demand can result in reduced private-sector investment and hiring, further affecting employment levels.
4. Economic Multiplier Effect: Government spending has a multiplier effect, meaning that each dollar spent by the government can have a larger impact on the overall economy. When fiscal spending decreases, the multiplier effect diminishes, potentially dampening economic activity and growth.
5. Fiscal Drag: Lower fiscal spending can contribute to fiscal drag, which refers to a situation where the reduction in government spending leads to lower economic growth and tax revenues. This can result in a larger budget deficit or reduced budget surplus, as tax revenues decline due to the weakened economy.
6. Potential for Austerity Measures: In some cases, lower fiscal spending may be part of a deliberate austerity policy aimed at reducing government debt and deficits. While austerity measures are intended to improve long-term fiscal health, they can also have short-term negative effects on the economy, such as reduced consumer and business confidence, slower economic growth, and social discontent.
While we are experiencing Quantitative Tightening monetary policies by FED, potential fiscal tightening could lower the growth exponentially in longterm.
conclusion:
Market reaction To Deal: Short term sharp Bullish rally
Market reaction To No Deal: Short term sharp Bearish rally
Best,
How likely is to have a deal in the next 10 days?
Political Game is a Zero-Sum game!
Economy: It is a zero sum game which could lead to a negative Sum game!
Lower fiscal spending can have several effects on the economy, which can vary depending on the specific circumstances and the magnitude of the reduction. Here are some general effects of lower fiscal spending:
1. Reduced Aggregate Demand: Fiscal spending is a component of aggregate demand, which represents the total level of spending in the economy. When fiscal spending is reduced, it can lead to a decrease in overall demand for goods and services. This can result in lower economic growth, reduced business revenues, and potentially higher unemployment rates.
2. Decreased Government Services: Lower fiscal spending often translates into reduced funding for government programs and services. This can affect sectors such as education, healthcare, infrastructure, and social welfare. The quality and availability of public services may decline, impacting the well-being of citizens and overall social development.
3. Impact on Employment: Fiscal spending can directly or indirectly contribute to job creation and maintenance. Lower spending may result in fewer government-funded projects and contracts, leading to job losses in industries that rely on government spending. Additionally, reduced aggregate demand can result in reduced private-sector investment and hiring, further affecting employment levels.
4. Economic Multiplier Effect: Government spending has a multiplier effect, meaning that each dollar spent by the government can have a larger impact on the overall economy. When fiscal spending decreases, the multiplier effect diminishes, potentially dampening economic activity and growth.
5. Fiscal Drag: Lower fiscal spending can contribute to fiscal drag, which refers to a situation where the reduction in government spending leads to lower economic growth and tax revenues. This can result in a larger budget deficit or reduced budget surplus, as tax revenues decline due to the weakened economy.
6. Potential for Austerity Measures: In some cases, lower fiscal spending may be part of a deliberate austerity policy aimed at reducing government debt and deficits. While austerity measures are intended to improve long-term fiscal health, they can also have short-term negative effects on the economy, such as reduced consumer and business confidence, slower economic growth, and social discontent.
While we are experiencing Quantitative Tightening monetary policies by FED, potential fiscal tightening could lower the growth exponentially in longterm.
conclusion:
Market reaction To Deal: Short term sharp Bullish rally
Market reaction To No Deal: Short term sharp Bearish rally
Best,
All the information you need to make an informed decision for free in the next 3 weeks: docs.google.com/spreadsheets/d/11cFXkX6bPFslJzkQxtLJKDNWZQhpaBvuoZvDiFonZuc/edit?usp=sharing
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