So, the US elected not to do a Thelma and Louise and drive off the "fiscal cliff". In one sense this was eminently predictable. The only reason the fiscal cliff was there in the first place was that US law-makers had conjured it up during the Bush years to kick the problem of excess borrowing down the tracks.
The fiscal cliff consisted of legislation to reduce spending and increase taxes, and would thereby tackle the deficit, the difference between government borrowing and government revenue, in due course. The projections showed that in 2013 the deficit would have been cut in half.
But the consequences for growth of taking that much money out of the system – a projected US$487 billion – were suddenly too much to bear. The crucial question suddenly became - which matters more to the US – growth or deficit reduction?
We now have our answer. Instead of the US$487 billion in deficit reduction envisaged by the legislators that put the fiscal cliff in place, Obama's compromise with the Republicans envisages a mere US$157 billion.
In that context, it's no wonder markets did well last week, as we reported in our weekly roundups. The Australians did especially well, as bullish noises from China fed into the optimism.
Everyone recognises that US debt will have to be paid down eventually. But America, as the most powerful nation in the world, has a big advantage in the currency wars that are now raging.
The competitive printing of money appears to have run its course in the immediate term. But as a way of cutting debt, it's second to none. And that continues to bode well for gold, despite the current correction.
The real question though, is whether any of this will translate into meaningful moves for junior mining shares. For that, we shall have to wait and see.
| Jobs4mining in association with Minesite.com |
Experienced Expats are always in demand. The end of December and beginning of 2013 has certainly not been quiet at jobs4mining. Knowledgeable and senior metallurgical skills continue to be under pressure with few young people choosing mining as a career opportunity.
We take your job vacancies to around 60,000 mining professionals worldwide. Contact us for further information and prices.
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Mineral Resource Manager With Experience In Underground And Open Pit Essential - Africa
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