The US government is partially shut down. About 800,000 U.S. government workers have been off the job for almost a week now because Congress failed to pass a key funding bill.
This has happened 17 times in the past before, the last time was in 1995 when the government shutdown lasted for 3 weeks. 800K is less than 1% of the total US work force so it won’t affect the overall economy much 😐 If the shutdown only lasts for 2 or 3 weeks, there’s nothing to worry about unless you’re one of those people who are directly impacted. So what does this mean for Canadians? Not a whole lot 🙂 The impact of the shutdown to our economy up here is measured only in the decimal points.
However, here is what we need to know.
- Our Loonie will probably rise in the short term. An exchange strategist with Nomura Securities in New York speculates U.S. capital could flow into Canadian treasury bills as investors look for a safe place to hold their cash. So if you’re thinking about shopping cross border I suggest visiting the US now, instead of waiting because it will probably get more expensive to buy US dollars over the next couple of weeks.
- The US stock markets will be volatile going forward since the federal government isn’t releasing important economic data that investors need in order to make an informed decision. Expect our TSX to hit some choppy waters as well.
- Exporters beware. Canadian businesses with contracts with US companies or the US government might experience complications. So if you run an export business be prepared for the possibility of delayed payments or slower business from US customers.
- US National parks and many other tourist attractions are closed so if you were planning to visit the National Zoo in Washington, now’s not the time.
The bigger issue right now is can Congress agree on a budget before October 17th so they can raise the debt ceiling. If the debt ceiling isn’t raised then the US government will have to default on its debts. This could create a $600 billion hit to the US economy. National GDP could fall 4% which would quite literally put the US back into another recession, which will significantly impede Canada’s growth as well.
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Random Useless Fact: Some animals can detect sound at a higher frequency than humans allowing them to hear noises we can’t.
This whole government shutdown and congress dragging their feet has been a complete debacle. Just because they couldn’t put their petty differences for the greater good of the country. I guess when you look at it from the macroeconomic level the effects seem minuscule…Look at it though from the perspective of a government employee who has been furloughed or from a food-truck operator who hits national parks etc and things stop looking so rosy.
Hopefully they can resolve this mess before that D-Date otherwise, a lot more people’s geese will be cooked!
Just goes to show how important it is to have diversified revenue streams. If I was furloughed at my job, at least I can still look forward to the stock dividends, and rental income, to get me by for a couple of months before running into any real financial trouble.
You summarized the impact pretty well – that the dollar would get weaker, I think I had anticipated, and the stocks would be uncertain, that was expected too, but the idea that trade would be difficult, well, that makes it all the more clear that this shutdown wreaks trouble. This may have happened in the past, 1995 as you say, but the US economy was doing well prior to that, and the past few years just made it more difficult for the USA to recoup from the terrible deadlock in the Congress…
I’m planning to buy some gold and the volatility index as some insurance against the markets. Hopefully the deadlock in Congress won’t lead the country into recession but just I’ll try to be prepared just in case 😐
What I think matters most is that all this circus is directly affecting people like you and me, who are not rich and for which such a problem is really painful money wise. Many don’t have emergency funds, many won’t be able to keep up with their payments. Let’s hope it won’t last long.
Yeah, I wonder how the people in the House and Senate would feel about all this if their salary was stopped 👿 Their game of political chicken is hurting the people who they’re suppose to represent.
We have 17 trillion in debt and it only increases. We need to stop spending so much money. From what I’ve read, Canada has very little debt. How would you like to put your kids in a position to be tied to the national debt?
Yeah, it’s not too bad up here. We only have $640 billion of debt, which is about 1/3rd of our GDP. It wouldn’t be fun telling my future kids they’ll be inheriting the national debt, especially if I were to live in the US 🙁 What I think will happen is the government and the Federal Reserve will try to inflate the country out of debt.