A strange light has been cast over the world's financial markets in the past week. To paraphrase Morrissey, "there is a light that never goes out" in Washington DC, but the flickers of the dying embers of a US fiscal deal have remained - despite the 11th hour agreement to avert a crisis.
The deal put together by the 113th Congress and signed by President Obama is the dictionary definition of temporary. Previous continuing resolution deals that allow the US government to remain funded, and avert periods of 'shutdown', have typically lasted a year. This one lasts until January 2014 only. Furthermore, previous decisions around the 'debt ceiling' have extended the US's credit card limit by enough to allow for 12-18 months of spending in the past. This most recent one leaves us hitting the ceiling once again, just before Valentine's Day of next year. It is a temporary stopgap.
The logic behind this is that Democrats and Republicans will come together in the next few days and weeks and hammer out a deal to tackle longer-term deficit reduction, which will also allow the US Federal Government enough room to breathe.
With the near-term risk of a sovereign default now out of the way, the market discussion is now about how much damage the shutdown and debt ceiling showdown have done to the US economy. The ratings agency Standard & Poor's, who stayed quiet on ratings movement during the past few weeks, estimate that the shutdown has taken 0.6% off annualised GDP, roughly equivalent to $25bn.
The key to future spending going forward, however, will be confidence. With the prospect of another fight in the New Year, there is little at the moment to stop consumers keeping their hands in their pockets over the important festive period for fear of another shutdown. Who can blame them?
There is a lot of emphasis to put behind the belief that the US shutdown should be treated as a big, red reset button. The market will of course care about the data that was released during the fortnight of furlough, but that will be easily trumped by the data that takes into account the output lost during the fiscal issues.
As it stands, the market has now moved its expectations of when the Federal Reserve will believe that the US economy will be strong enough to reduce its monthly stimulus injections of $85bn well into 2014. Consensus seems to be that March 2014 will be the time, with a significant portion of the delay as a result of the fear that Congress could easily spend January and February in a similar squabble.
The argument here is that if we are delaying a shift in monetary policy towards a more normal, tighter way of doing things, because politicians may act stupidly, then we could be here for a very long time. This, of course, does not only extend to the US. Those of a political stripe in Europe, the UK, Japan and elsewhere have all spent a large part of the past 5 years infuriating the markets in equal measure.
In the meantime, a lack of political pain in the US, Europe, UK, Japan or the rest of the G20 for now should mean that markets will continue to bask in this tepid glow of achievement.