Now that a deal has been reached in Washington, questions emerge about what happens now with America's finances. Chief economist at Mesirow Financial Diane Swonk clarifies what this deal means.
Though the deal avoids going over the fiscal cliff, the focus needs to be on improving the U.S. reputation in the financial market around the world. She says we need to take Moody's and Fitch's threats to be downgraded seriously. She says, “There’s a false sense of security. Remember, we were sort of as some people put it the cleanest shirt in the dirty shirt pile. At the same time we got downgraded, the Federal Reserve was counteracting the downgrades with massive movements to buy treasury bonds and the massive flight to safety. The U.S. was looking bad, it was looking better than Europe was and financial markets in the U.S. because we are a reserve currency, we’ve gotten the benefit of that for some time now.