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News & Updates
Mortgages: A Head Scratcher For Consumers
Article written by Boris Bozic on the 24 Jan 2012
"We, the consumer, read about these mortgage issues in the media and try to understand but the complexity of these issues leave us somewhat baffled."
The Bank of Canada decided to leave the overnight lending rate at 1%, and we're all but assured that rates will mill remain at current levels for the remainder of 2012. Sure, things could change but for rates to trend upwards would mean that the BOC is no longer concerned about our fragile economy. There was also good news - the Minister of Finance said there would be no changes to the "mortgage rules" at this time. With the caveat that Finance is prepared to intervene if necessary.
What would make it necessary for the Fed's to intervene? Where's the line in the sand? That's what I find intriguing about about the "consumer debt" debate. Many have stated there should be real concern over the consumer debt levels but no one has stated that if we reach a point where the debt exceeds "X' percent we will have passed the point of no return. Talking about these issues in an abstract or theoretical context may be interesting, and illuminating, but for it to have real impact - a change in borrowing habits - clearly defined parameters are required.
Open dialogue is healthy and all stakeholders should be a part of the discussion. I find it curious that the one stakeholder who we haven't heard much from as it relates to the "consumer debt" debate is, well, the consumer. The text being allocated to this issue is courtesy of the politicians, bankers and those suppliers who benefit economically from increased borrowing. I'm not sure what the collective voice of the consumer would be regarding this issue but if I was to venture a guess I would think it might sound something like this...
"Firstly, we the consumers would like to thank the bankers, economist and politicians for giving us an opportunity to have our voices heard. We consumers aren't as smart you folks are when comes to credit. You're the experts and you do this everyday. We read about these issues and try to understand but the complexity of these issues leave us somewhat baffled. We hear from you really smart folks that our homes are overvalued by 10% to 15%. Some of you are also concerned about how much money we're borrowing. Yet you same smart folks just started an interest rate war. This is where it gets really complicated for us. You say homes are overvalued yet you lower your interest rates so you can compete for over valued properties to mortgage? You say you're concerned about our debt levels yet you lower rates so we can take on even more debt? These issues are way above our heads so we the consumers are going to focus on something which is much easier to understand, like how to split an atom".
Until next time,
Cheers.
Market Commentary
January 17, 2012
As expected, the Bank of Canada held its overnight rate steady at 1%, citing an uncertain global economic backdrop an expectations that recent growth in the US will moderate in the months ahead. Should the economic picture deteriorate further, the Bank of Canada has the flexibility to decrease its overnight rate, and in fact, markets are actually assigning a very high probability of a 25bp cut in the overnight rate at some point in 2012.
Canada caught between Europe downturn, U.S. growth
By John Morrissy, Financial Post Of course, that's all assuming European policy-makers finally take action to deal with the currency bloc's debt crisis, said RBC chief economist Craig Wright. But if they do, Canada will experience moderate growth in the economy of 2.5%, Mr. Wright said. Supporting that expansion will be low Canadian interest rates, high commodity prices and a U.S. economy that should also expand at a 2.5% pace despite continuing high unemployment and its blighted housing market. Yet even if the eurozone survives its indecision and foot-dragging on dealing with the debt crisis, Mr. Wright expects the area to fall into recession, albeit a short-lived one, which will weigh on Canadian exports. As such, Mr. Wright said, "Given concerns about the weakening global economy and its impact on Canada's growth momentum, we expect that the Bank of Canada will maintain its accommodative policy at least until mid-2012." Bank governor Mark Carney and his advisers played into that forecast Tuesday, saying they would hold the bank's key lending rate at one per cent "over the medium term," citing a deteriorating global outlook but better-than-expected performance in Canada and the U.S. in the second half of this year. "The biggest change to the composition of growth will come from net exports, driven by stronger U.S. expansion and rising demand for auto and energy products," said Mr. Wright. Yet, another variable that could throw the forecast of target is record high levels of consumer debt, which "has made the economy more vulnerable to a sharper downturn should there be any unexpected shock like a deterioration in the labour market, a drop in housing prices or spike in interest rates," Wright warned in the report, whose 2.5% target is unchanged from September. He added those outcomes are unlikely, and according to a report from Re/Max on Tuesday, the housing market will hold up its end of the bargain, with sales continuing to climb in 2012 and prices to rise to an average $363,000.
OTTAWA - The Canadian economy will walk the line in 2012 between a downturn in Europe and continuing growth in the United States, according to a an outlook issued Tuesday by RBC Economics.
Canada's economy goes on a slower path
OTTAWA-Europe's debt quagmire, a flagging U.S. rebound and slowing growth in China are taking the steam out of Canada's economic outlook.
Canada's top policy makers said the country's prospects for this year and next have deteriorated as a slowing global economy weighs on exporters and cuts into confidence at home.
Consumer and business spending is expected to slow and unemployment is expected to hover close to the current 7.1-per-cent level for years, factors that will likely keep interest rates near emergency levels until as late as 2013. Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty insist Canada and its top trading partner, the United States, won't slide back into another recession. However, both suggested that outlook depends on European leaders to contain a debt crisis before it pushes the region into a serious slump. Mr. Carney on Tuesday left the Bank of Canada's key interest rate at 1 per cent for a ninth consecutive decision. Canada will feel the effects of weak U.S. growth that will persist until mid-2012, and a "brief recession" in the euro zone, he noted. The bank chopped its forecasts for 2011 and 2012 and said the Canadian economy will not return to full capacity until the end of 2013, 18 months later than policy makers had projected in July. And Mr. Flaherty said the economic projections that underpinned his latest budget face a "significant downgrade." The gloomier outlook comes ahead of a crucial gathering of European leaders on Wednesday and a Group of 20 summit next week in France, both aimed at stemming the euro zone debt mess before it engulfs the continent's banking system and tips the world economy back into recession. The slowdown is already affecting Canadian financial conditions, consumer and business confidence, and trade, the central bank said, also warning that while its forecast assumes the European crisis will be contained, that notion is "clearly subject to downside risks." Even if the European situation doesn't worsen, through the end of 2012 Canada will see "very modest" growth that's just enough to "keep the unemployment rate treading water," said Leslie Preston, an economist at Toronto-Dominion Bank. The Bank of Canada said the economy will grow 2.1 per cent this year instead of its July call of 2.8 per cent, and 1.9 per cent in 2012, down from 2.6 per cent. In 2013, the economy will grow a healthier 2.9 per cent, roughly equal to the average for the two decades before the crisis. In the meantime, household spending will "grow relatively modestly," the bank said Tuesday, as lower commodity prices and volatility in markets weigh on Canadians' sense of financial well-being. Business investment will continue to grow but will also be "dampened" by the global outlook. All of which means the bank will likely leave interest rates untouched for much of 2012 and possibly into 2013, economists said. Indeed, despite hotter-than-expected inflation readings in recent months, bank policy makers said Tuesday that the drop in energy prices since the summer and a slowdown in big emerging markets like China will tame inflationary pressures everywhere. Some Canadian companies say they've come to accept that their traditional markets will be lukewarm as governments and consumers unwind the massive debt they incurred in recent years. "These are marathon issues, they're not sprint issues,'' said Tom Schmitt, president and CEO of Purolator Courier Ltd., Canada's largest courier company. "We're probably talking about years of a little bit of bumpiness along the road." Similarly, Don Lang, executive chairman of CCL Industries Inc., a Toronto-based specialty packaging company, said a "pullback" in orders through much of the developed world is still better than a downturn. "From our perspective, it's business as usual," Mr. Lang said. "Positive growth is positive growth, so there are still lots of opportunities for businesses that are well-placed."
Canada Housing Starts Jump 7.3% In September From August
TORONTO (Dow Jones)--Canadian housing starts rose 7.3% to an annual rate of 205,900 in September, mainly due to an increase in multiple starts, Canada Mortgage and Housing Corp. said Tuesday. Results were well ahead of the 189,000 rate analysts surveyed by Dow Jones had projected for the month. The September rate was up from a revised 191,900 units in July. CMHC said the pickup in September housing starts reflects an increase in multiple starts in the Atlantic region, Quebec and in British Columbia, but noted that multiples "are expected to move back towards levels consistent with demographic fundamentals in the near term." CIBC World Markets agreed, saying in a note that multiple starts are "widely expected to scale down in the months ahead." However, CIBC said the data suggest residential construction could be a positive for GDP in the third quarter "as homebuilding continues to garner support from a low rate environment, and a robust multiples market." In September, urban starts rose 8% to 185,900. Multiple urban starts were up 14.2%, while urban single starts were down 1.5%. Last month's seasonally adjusted annual rate of urban starts jumped 47% in the Atlantic region, 32% in Quebec and 18.6% in BRitish Columbia, while urban starts fell by 3.5% in Ontario and 12.1% in the Prairie region. Rural starts were estimated at 20,000 units in September. Website: http://www.cmhc-schl.gc.ca
The Bank of Canada's changing language
On Wednesday September 7, 2011, 4:51 pm EDT Watching the Bank of Canada's language on the economy change over the past year is like seeing a healthy, upbeat person gradually come around to the idea that a serious illness is overtaking them. A year ago, the central bank was continuing the slow process of raising its key interest rate toward familiar levels, as the western world began to put the financial cataclysms of 2008 behind it. On Sept. 8, 2010, the target rate for overnight loans between banks rose to one per cent. And here's how the world economy looked to the Bank of Canada - getting better, but though not steadily: "The global economic recovery is proceeding but remains uneven, balancing strong activity in emerging market economies with weak growth in some advanced economies," the Bank of Canada said in September of 2010. And Canada's economy - buoyed by demand for commodities like oil, gas, uranium and fertilizer - was recovering: "The Bank now expects the economic recovery in Canada to be slightly more gradual than it had projected in its July Monetary Policy Report (MPR), largely reflecting a weaker profile for U.S. activity," the central bank's statement read at the time. It was canny, however, about forecasting any further increases in rates, sensing possible trouble ahead: "Any further reduction in monetary policy stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook." That was code for don't get too excited, folks: a lot could still go wrong - and it did. Remember that for more than a year, from April 2009 to June 2010, the central bank's key rate had been 0.25 per cent - effectively zero, or maximum stimulus, as a rising Canadian dollar did some of the bank's inflation-cooling work and the world began to recover its appetite for Canadian commodities. The bank had gradually increased its key rate over the next few months to 0.75 per cent. Then came the bump to one per cent exactly a year ago. Since then, as Europe's debt problems have flared in Greece, Ireland, Portugal and Spain, and in some people have taken to the streets to protest government attempts to curb spending and remain solvent, the Bank of Canada's key rate has been rock steady at one per cent. Now watch how the language has moderated, as central bank economists saw the economy flattening: On Oct. 10, leaving the rate at one per cent, the bank said: "In advanced economies, temporary factors supporting growth in 2010 - such as the inventory cycle and pent-up demand - have largely run their course and fiscal stimulus will shift to fiscal consolidation over the projection horizon .... The combination of difficult labour market dynamics and ongoing deleveraging in many advanced economies is expected to moderate the pace of growth relative to prior expectations. These factors will contribute to a weaker-than-projected recovery in the United States in particular." By Dec. 7, it saw recovery "largely as expected," but sounded the first note of bigger trouble ahead: "At the same time, there is an increased risk that sovereign debt concerns in several countries could trigger renewed strains in global financial markets." On Jan. 18, 2011 - happy new year! - there were signs the economy was rebounding all too well, with government spending in the U.S. and Canada showing up in growth all over. As well, Canadian commodities remained hot sellers, pushing up the value of the Canadian dollar. In fact, the bank said, "the cumulative effects of the persistent strength in the Canadian dollar and Canada's poor relative productivity performance are restraining this recovery in net exports and contributing to a widening of Canada's current account deficit to a 20-year high." Translation: "No need to raise interest rates." On March 1, the recovery kept pushing ahead, driven by exports, but the bank left rates unchanged, and stuck with this now-boilerplate paragraph at the end of its release: "This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada. Any further reduction in monetary policy stimulus would need to be carefully considered." On April 12, the bank forecast 2.9 per cent gross domestic product growth in 2011 and 2.6 per cent in 2012 - all good, with robust spending and business investment leading investors to "become noticeably less risk-averse." And yet, searching the horizon for clouds, the bank saw enough to stick with its boilerplate: "This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of material excess supply in Canada. Any further reduction in monetary policy stimulus would need to be carefully considered." By May 31, however, the bank began to see some of its more horrible imaginings coming true, and the boilerplate was dropped. Again leaving the key rate at one per cent, the bank said global inflation might be growing, but "the persistent strength of the Canadian dollar could create even greater headwinds for the Canadian economy, putting additional downward pressure on inflation through weaker-than-expected net exports and larger declines in import prices." Stimulus might be "eventually withdrawn," it said, but "such reduction would need to be carefully considered. " On July 19, the bank's language noted slower-than-expected U.S. economic growth, Japan recovering at a lower-than-expected pace from its nuclear disaster, and said "widespread concerns over sovereign debt have increased risk aversion and volatility in financial markets." In other words, investors were getting jumpy about how Europe might pull itself together without major defaults and weakened currency." And on Wednesday, laying out all the factors that are besetting global growth and the Canadian economy, the bank finally sounded a doctor facing a sick patient. It didn't explicitly suggest returning to more stimulus (lowering interest rates), as some economists had forecast it might, but the bank no longer expected to withdraw economic stimulus: "In light of slowing global economic momentum and heightened financial uncertainty, the need to withdraw monetary policy stimulus has diminished. The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2 per cent inflation target over the medium term."
Fixed Rate or Variable Rate......has the choice become easier?
August 26th 2011
The age old question facing consumers, do I take a fixed rate or variable rate......and a similar dilemma facing mortgage brokers as their clients ask them for advice on which option to take. We all know it depends on the client's appetite for risk, affordability, cash flow stability, etc. however statistics have shown that taking a short term or variable rate has predominantly, but not always, been cheaper than take a longer fixed rate mortgage.
We maybe in or coming to an interest rate environment when taking a fixed rate or a hybrid mortgage (50/50) may actually be cheaper than staying in a variable rate. Why you ask.....let's look at the facts as to why this maybe a good time to take a fixed rate or hybrid mortgage.
1. 5 year fixed rates are at the lowest levels in history, we have never been this low.....3.39% and 3.49% 5 year fixed rates are available through many lenders.
2. The gap between a prime - .50% (2.50%) and 5 year fixed rate (3.49%) is 0.99% and (in some cases even lower ), this is down significantly from 3 to 4 months ago when the gap between a 5 year ARM and 5 year fixed rate was as high as 2.00%
3. We have just seen major Bank's increase ARM rates by 20 bps as liquidity costs and funding costs are starting to take their toll and forcing the increase in ARM rates, thus making the ARM to Fixed rate spread or gap even narrower and will this trend continue
4. You can't predict when to time a conversion from ARM to Fixed rate, especially in a volatile market. Fixed rates have a tendency to move ahead of variable rates....when variable rates begin to rise the fixed rate has already gone up and if you convert you maybe converting at a much higher fixed rate than today's rates.
5. Watch for what I refer to as the "Fixed Rate Bubble". We have seen a large amount of mortgages over the last two years take a variable rate versus fixed rate, including renewal clients. I estimate that as much as $350 billion in mortgages outstanding are in variable rate today. Probably the highest levels we have seen in the Canadian mortgage market. If we see a large increase or numerous simultaneous increases in prime rate over a short period of time AND we experience a mass conversion from variable rate to fixed rate, what will happen to fixed rates? If demand for fixed rate outstrips supply of fixed rate funding, then fixed rates will have nowhere to go but up. We have seen mass conversions in the past, however, the potential magnitude in volume that exists today has never been experienced before and we could be entering into new territory.
No position is complete without looking at the counter arguments', in other words why a client should consider a variable rate versus fixed rate mortgage. Once again let's look at the facts.
1. Bank of Canada has indicated it is not looking at raising the overnight anytime soon or at least will hold off until such time as it sees the economy improving
2. There is no indication that inflation is increasing, therefore supports point 1 above.
3. U.S. has no plans to increase rates for the next two years making it more difficult for Canada to raise rates unless the Canadian economy is growing in spite of the U.S. being sluggish
4. Canada is becoming a safe haven for investors' thus larger demand for Canadian bonds. This demand is keeping bond yields down thus lower fixed rates on mortgages.
Both positions have merit and no one has a crystal ball and if we did we wouldn't be working we would be sunning ourselves on an island paradise we just purchased with the massive amount of money we made playing the markets.......well back to reality.
If we continue to see the gap between fixed rate and ARM rates shrink then the risks of taking a variable rate versus fixed rate increases substantially. The risk being that ARM rates could increase higher than 1 % over the next 18 months to 24 months, therefore over the course of a 5 year term the fixed rate maybe less costly than the ARM rate. Once the gap between ARM and fixed gets to 1% or less, I believe the smart money would go to fixed rate versus ARM. If the gap between ARM rate and fixed rate is between 1% and 1.50% then a 50/50 mortgage maybe the best bet. If the gap between ARM and fixed rate is in the 1.50% to 2.00% range then ARM rate maybe the way to go. Based on the present volatile market conditions it is hard to predict or say what will happen, this volatility, is the biggest wild card and probably the main reason I personally would be taking a fixed rate or 50/50 versus an ARM, a bird in the hand (fixed rate) is better than two in the bush (ARM rate).
John Bordignon
EVP, Strategic Development, Paradigm Quest Inc.
Fed to Hold Rates ‘Exceptionally Low' Through Mid-2013
BINYAMIN APPELBAUM, On Tuesday August 9, 2011,
WASHINGTON - The Federal Reserve said Tuesday that it will hold short-term interest rates near zero through mid-2013 to support the faltering economy, but it announced no new measures to further reduce long-term interest rates or otherwise stimulate renewed growth.
The Fed's policy-making board said in a statement that growth "has been considerably slower" than it had expected, and that it saw little prospect for rapid improvement, prompting the change in policy. It had previously said that it would maintain rates near zero "for an extended period."
"The committee now expects a somewhat slower pace of recovery over the coming quarters," the Fed's statement said. "The unemployment rate will decline only gradually."
Many economists and outside analysts argue that the Fed should act more aggressively in response to rising unemployment and faltering growth. But internal divisions are limiting the central bank's ability to pursue additional steps.
Even the modest commitment announced Tuesday was passed only by a vote of 7 to 3. The central bank prefers to act unanimously whenever possible.
The dissenters included Richard W. Fisher, president of the Federal Reserve Bank of Dallas; Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis; and Charles Plosser, president of the Federal Reserve Bank of Philadelphia.
The three men regard inflation as a more serious threat to the economy than unemployment.
The Fed's announcement was eagerly awaited by investors who have responded to grim economic tidings in recent weeks by driving down global markets.
The economy grew only 0.8 percent during the first half of the year. The work force is shrinking. State and local governments are cutting back. And fiscal policy is immobilized by partisanship, leading Standard & Poor's to remove the United States from its list of risk-free borrowers.
That has left investors to hope that the Fed would consider new steps to help the economy.
The central bank has held its benchmark short-term interest rate near zero since December 2008, flooding the financial system with the nearest thing to free money. It has promised after each of its meetings since late 2008 to keep interest rates near zero "for an extended period," which Mr. Bernanke defined earlier this year as meaning a period of at least several months.
The central bank also has amassed more than $2.5 trillion in Treasury securities and mortgage-backed securities, putting downward pressure on long-term interest rates. The purchases have pushed investors into the stock market and other riskier investments, and reduced the value of the dollar, helping American exporters. The Fed has said that selling off these assets would be its first step when the economy begins to improve, but it has avoided setting any timetable for a wind-down.
Mr. Bernanke said last month that the Fed was "prepared to take further steps if needed," but he made clear that the central bank was reluctant to do so. He said the Fed would act only if growth continued to falter and, importantly, only if price increases slowed, stopped or reversed.
The inflation of prices and wages is the Fed's primary concern. By law the Fed is responsible for keeping prices steady and unemployment as low as possible. But Mr. Bernanke, like his predecessors, places greater emphasis on prices, in part because the Fed has concluded that slow, steady inflation - about 2 percent a year - is the best atmosphere for enduring job growth.
The Fed projected in June that inflation could reach 2.5 percent this year, a key reason it has shown little interest in taking additional steps to help the 25 million Americans who can't find full-time work.
There are signs that inflation is abating, as a temporary spike in commodity prices earlier this year works through the economy, and as growth weakens. But conservative members of the policy-making board remain focused on the risk that inflation will sneak up on the Fed.
The Fed's policy-making committee next meets Sept. 20. http://ca.finance.yahoo.com/news/Fed-to-Hold-Rates-nytimes-656750399.html
The market reacts to U.S. credit downgrade
The Chase by Marty Cej:
So many angles, so little time. Our immediate focus must be on the markets: bonds, currencies, stocks and commodities. The bond market will dictate the direction of stocks today as investors try to price in the impact of higher borrowing costs in the U.S. on economic growth and earnings. Most of our viewers view the health of the financial system through the prism of their own stock portfolios so we need to constantly connect the dots and answer the questions of how and why a downgrade to U.S. debt affects Canadian equities.
In the simplest terms, higher interest rates on U.S. bonds mean higher rates on any loans tied to Treasury securities, such as mortgages and car loans. Higher borrowing costs for U.S. consumers and companies mean slower growth, which in turn means less demand for goods and services. But will this downgrade from S&P necessarily lead to higher rates? In a note to clients this weekend, the analysts at Strategas examined all the instances of downgrades from AAA over the past 25 years and found that in 10 of 11 cases, the local 10-year government bond yield was lower a year later. Governments, they argue, fight back when they are challenged. Barry Ritholtz has pointed out as well that Japanese stocks rallied more than 3 percent on the first day of trading after that country's debt was downgraded in 2001.
We need to pick apart the impact of the debt downgrade on stock sectors including the financials, resources, consumer discretionary and technology. Did I mention the financials? That includes the banks, insurers and money managers.
Glancing away from the stock market for a moment, we'll need to talk about what it means for the Canadian bond market now that we are one of the few AAA credit ratings left out there that can still field a competitive hockey team. A quick look at the screens shows the yield on the 10-year Canadian bond soaring 14 basis points to 2.63 percent. What gives? Just as the downgrade to U.S. debt will have knock-on implications for state and municipal debt as well as the debt on U.S. government-related entities, there will be knock-on affects for Canadian provincial, municipal and corporate debt.
And what about the ratings agencies themselves? Here's what PIMCO's Mohamed El-Erian had to say: "The future role of rating agencies will also now come under close scrutiny, bringing to the fore the question of who rates the rating agencies? S&P's action will likely unite governments in America and Europe in an effort to erode their monopoly power and operational influence. This will also force all investors to do something that they should have been doing for years: conduct their own ratings due diligence, rather than rely on outsiders." Has S&P bolstered its reputation or ruined it for good?
The G-7 said it will step in with a coordinate effort to stabilize financial markets with particular attention to the currency market and the ECB has stepped in to buy Italian and Spanish bonds - yields on 10-year debt are down 75 and 83 basis points respectively - so could today actually prove to be the inflection point in the rout that has lasted two weeks?
In commodities, gold is shining and oil is tumbling. Pork bellies - bacon, mmmmmm - wheat, sugar, copper... they're all down.
That's just for starters, and I haven't even touched on Europe.
Every morning Managing Editor Marty Cej writes a "chase note" to BNN's editorial staff listing the stories and events that will be in the spotlight that day. Never miss an edition of The Chase.
U.S. debt crisis averted as budget deal passes
By Mitch Potter Washington Bureau
WASHINGTON-America's dismal debt crisis ended Monday night with an astounding twist - the show-stealing return of Arizona congresswoman Gabrielle Giffords, back on the House floor to cast a heroic vote to save the country from default.
Giffords stunning appearance, her first since being gunned down by a would-be assassin on the streets of Tucson in January, sparked standing ovations, bringing one of the bleakest demonstrations of political paralysis to an unexpectedly heartening close.Her vote counted. But it was hardly essential, as a last-ditch budget deal unloved by all sides flew easily through the House of Representatives, passing 269-161.
Translation: Crisis averted.
The package now will fly through the Senate in the morning, ready for President Barack Obama's signature well before the government's midnight Tuesday deadline, allowing the country to borrow anew - and putting global markets at ease, as the calamity of potential default evaporates.
After that, watch for Washington to slink away for its August recess, with politicians of all stripes hoping what remains of the summer will be sufficiently distracting to tamp down public disgust.
The anger is global, as Russian Prime Minister Vladimir Putin made clear Monday when he hurled invective, accusing the United States of "living like parasites off the global economy.
"Thank God that they had enough common sense and responsibility to make a balanced decision," said Putin, a frequent critic of the U.S. dollar's status as the world's default currency.
But it is the American verdict that worries Washington most. A new pulse taking by the Pew Research Center showed the three-week standoff earned the contempt of nearly three-quarters of respondents.
Asked to characterize their leaders' behaviour in a single word, the Pew/Washington Post survey said the Top 10 responses were: "Ridiculous," "Disgusting," "Stupid," "Frustrating," "Poor," "Terrible," "Disappointing," "Childish," "Messy" and "Joke."
As the U.S. commentariat worked through the fine print of an austerity bill to slice some $2.4 trillion from the U.S. deficit over 10 years, more fury still - much of it directed at Obama and the Democrats for what one New York Times columnist called "an abject surrender" to the unbending hawks of the Republican Tea Party movement.
With Republicans preening and Democrats aghast, the rhetoric on Capitol Hill was approaching viral. House Minority Leader Nancy Pelosi, who on Sunday said hinted the devil would be in the details, declared the package a "Satan sandwich with a side of Satan fries." But she ate it anyway, voting for the bill because there were no other viable options.
New York Rep. Charles Rangel was among more than 90 House Democrats to vote no, citing the total absence of any language likely to improve the tepid U.S. employment picture.
"If the Republicans would have had to hold the President hostage, I wish they would have held him hostage on the things my constituents wake up every morning thinking - how can I get a job, how can I get back my dignity?"
But Monday's House vote also forced the hands of a dozens of Tea Party-aligned conservatives, who stepped up to help pass the compromise bill, opening themselves up to primary challenges from ultra-conservatives in their home districts. The threat of primary challenge, first delivered in a thinly veiled Facebook posting last week by former Alaska governor Sarah Palin, was a constant throughout each act of this agonizing bout of political theatre.
It is difficult to envision what this leaves Obama to celebrate on Thursday, when he turns 50. The ever-changing White House bottom line - which began with insistence that America's wealthiest pay their part in the austerity to come - ended with Team Obama not having to worry about the debt ceiling issue until after the 2012 presidential election.
Yet it is abundantly clear the budget brinksmanship will erupt anew at least twice before the year is done - at the end of September, when a continuing resolution to fund the government is due to expire, and again, later in the fall, when the bipartisan debt commission created by this bill is due to produce recommendations on what precisely this plan will actually cut.
This is merely an intermission. Enjoy it while you can.
