Healthcare Reform Weighs on the US Dollar

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The healthcare reform passed the final hurdle in the American House of Representatives. I’m not going to enter the heated debate about the reform – I’m just going to deal with the implications for forex trading.

There are different sides to this story:

The Upside – Strong Government

The historic healthcare overhaul is a great victory for US president Barack Obama. This was one of the pillars of his policy. Although he had a hard time passing it through the complicated legislative system, a hard time winning support for it when there were lots of protests and more than a few compromises on the way, it finally passed.

This strengthens the notion that the country and the economy are under control and that future economic policy can be realized, getting the US and the world out of the current crisis sooner than later. So one hand, this success is positive for the dollar.

The Downside – High Cost of the Bill

The other side is the bill itself – the healthcare reform bill means an additional expenditure of 940 billion dollars that will be spent on the course of a few years. The US government already has a huge deficit. It will have to print more money – devaluing the dollar, or borrowing more.

The US, together with the UK, already risk losing their AAA credit rating. More debt raises the risk for defaulting. Although such a scenario seems imaginary now, this bill could result in a credit downgrade, that will hurt the dollar.

Greenback Depends on Jobs

I think that the high cost of the healthcare reform bill will weigh on the dollar. Similar to Obama’s stimulus package of $787 billion, or Ben Bernanke’s bond buying scheme of one trillion dollars, this program will also have a negative impact on the dollar.

In the long run, a lot depends on employment. If the American economy gains more jobs, prices will rise as well and the Federal Reserve will move on the rates, sending the dollar higher. A continued jobless recovery will hurt the dollar.

What do you think? How will the healthcare reform impact forex trading?

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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

11 Comments

  1. I believe that this new reform as decreased the US’s margin of maneuverability as far as the recovery and therefore will act as an extra burden. Whether it is a heavy or a light one, will depend on how the economic fares in the month to come.

    Mixed signals from economic indicators could increase volatility. If the indicators (mainly jobs) fare well, then it could be an extra boost for the dollar, and in the face of teh elections in England and the uncertinity in Europe, we could see a market dominated by bears.

  2. fxcompass forex analysis on

    It was interesting to see the markets react today. Since the new legislation will allow about 30M new people to get medical coverage, healthcare companies boosted equities because of the expected increase in medical supplies and services.

  3. This “reform” is nothing but another huge transfer of wealth from the productive part of the economy to the financial sector. It confirms the payment mechanism as the driver of medical care.

  4. Hugh McNeil on

    Health Care is costing you whether you know it or not. The cost to Americans who currently have Insurance is twice the cost of Canada’s. The average Canadian lives 10 years longer than the average American and more new babies die yearly per capita in America than Canada. If Americans were healthier then the Economy will do better with less disease to fight and lower long term costs. Also under the present system you have foreclosures and bankruptcies when people get really sick even with insurance because often there is a cap. So when they are bankrupt who pays? You do in taxes. The number of Hospitals that are cutting back see the results of that in California some even going OUT OF BUSINESS. That is because the people have to get help and can’t pay their hospital bills. Who pays you do and the community loses a hospital. There is no free lunch you pay me now or you pay me later better to help people now and the future is brighter more health care jobs and more hospitals able to pay bills and less stress and more productivity from healthy Americans. The insurance companies don’t work for you they work for profit and their shareholders and if you are really sick they will try to stop coverage so don’t be so smug because you have insurance.

  5. People tend to forget that the real impetus to healthcare reform was increasing efficiency in healthcare spending. This bill was the essence of fiscal responsability in light of the global economic crisis. Far from socialist, it will be a boon to the free-market, saving us money subsidizing inefficient care, and increasing consumption. It’s imperfections are evident, but simply the result of a congress and country held hostage by special interests.

  6. This does not mean more services for the 30million to be covered. This does not increase services, but spreads it thinner. More bottlenecks will have to be created to keep the services rendered in line with the funded supplies.

    Just as with every country with nationalized healthcare, services will be slower and more difficult to obtain. That weakens not only the dollar, but the country as a whole.

  7. Hugh McNeil on

    Roger quit lying to us I live in Canada and we have the same wait times as in America. You are being ripped off in America and fed lies by the HMOs and the Insurance Companies are laughing all the way to the bank. Canadas system is fairer and works better OVERALL for people and does not have a insurance companies saying who will die and live. Your dollar is going down becaue of FEAR not because of costs in health care it hasn’t even fully kicked in and already people are trying to say it doesn’t work. Shame on you learn your facts or keep quiet.

  8. vincent chiavetta on

    In plain english obamas health care is a travesty and i am for repealing it. thanhyou for your interst.

  9. John Herzog on

    Did the CBO quantify the savings to our country that will take place, as follows?;
    . health care costs are one of the top causes of bankruptcy. HCR will save $’s & trauma for many
    . bankruptcy & divorce go hand in hand. $’s & pain will be saved by divorces that do not occur
    . bankruptcy results in decreased job productivity
    These savings will he real but hard to quantify.
    .

  10. william daniel on

    does anyone really believe our government can run a health care system, when every thing they have run is going broke. Example DOE was put together to solve problem of relying on oil from other country’s what a laugh, postal service going broke, social security going broke, country going broke, etc. Yes their is no doubt we need health care and it’s a good thing it was passed, but be realistic it’s going to cost. The country’s that have health care does not have the expense we have for our military, don’t have the expense of our foreign aid, don’t have the expense of giving away the money to help all the crooks that started this melt down we are in, and the list could go on and on. so if we really want this to work we need to start paying attention to what we need in this country and not what other country’s need.
    For this country to function in the future we had better start spending no more than we take in, if not i’m afraid history will look back and say this USE to be great nation and greed and laziness broke this great nation of ours.

  11. CAROL ANDERSON on

    CAN YOU GUYS NOT JUST LOOK AROUND YOU AND SEE HOW MANY PEOPLE HAVE LOST THEIR ENTIRE SAVING AND THEIR HOME BECAUSE OF AN ILLNESS WHY WONT YOU PEOPLE LET YOUR TAXES WORK FOR YOU IN CANADA WE PAY SO MUCH TAX ON EVERYTHING BUT WE HAVE A REAL GOOD HEALTH CARE SYSTEM WHERE NO ONE IF FORGOTTEN OR TURNED AWAY WHERE AS YOU GUYS LIKE TO PUT ALL YOUR MONEY IN WARS,I THINK YOU SHOULD GO BACK TO THE IDEA WHERE CHARITY BEGINS AT HOME.