After America postponed its jump off the fiscal cliff in the small hours of Tuesday night, world stock markets soared. Anyone listening to the BBC yesterday with its headlines praising Barack Obama would think something quite profound had changed in the world’s greatest — if battered — economy. However, it has not.
Intractable problems — chief among them chronic over-spending and weak consumer demand — have still not been solved.
The tackling of those issues has merely been postponed until the end of next month, when America’s legally enforceable ‘debt ceiling’ will probably be reached.
That will be the moment that U.S. debt passes a pre-determined point — north of $16 trillion — and a raft of dramatic public spending cuts will be triggered.
However, America’s politicians — especially its weak-willed President — may lack the guts to act even then to reduce the debt.
On Tuesday, a self-serving and pitiful compromise was reached between Republicans and Democrats to raise taxes by a small amount on the richest Americans — those earning more than £245,000 a year will pay 39.6 per cent rather than 35 per cent.
Yet those traders who propelled international markets sharply upwards as a result seem to have forgotten that America’s debt is an incomprehensible $16.3 trillion (£10 trillion) and that its politicians are failing to reduce it.