Our long national nightmare is over ... well, at least until January.
While U.S. senators heaped praise on each other for finally reaching a (temporary) bipartisan solution to end the government shutdown and avert the financial Armageddon of a U.S. default, one couldn't help but wonder what the debacle has done to the U.S. economy.
IHS Global Insight released a report late Wednesday estimating the three-week government shutdown cost the economy $3.1 billion in GDP due to lost government services. The firm lowered its fourth-quarter GDP growth estimate from 2.2 to 1.6 percent due to the loss.
The spike in short-term interest rates caused by default fears earlier this week will result in the government having to pay an extra $114 million in interest costs on bonds auctioned in recent days, IHS said.
However, it's the longer-term effects that could do the most damage.
For decades, the idea of the "full faith and credit" of the United States was so secure that countries worldwide have hoarded our dollars and bonds, making them the backbone of the global banking system.
It's an amazing thing, when you think about it.
After all, a dollar is just a green slip of paper. It's not worth a set amount of gold or silver; it won't turn into diamonds as it ages. The only thing that gives it value is the belief that it has value.
Unfortunately, Washington politicians don't seem to understand that concept.
Sure, they avoided default. But they made people worry about it first -- and that's a dangerous thing to do in a monetary system built solely on perception.
Under normal circumstances, no banker would ever doubt the value of the dollar or the nation's ability to meet its financial obligations.
However, Congress, through its self-interested political brinksmanship, led the world over the last few weeks to doubt not the country's ability to uphold its credit, but its willingness to do so.
When Fitch Ratings put the U.S. on ratings watch negative Tuesday, the company basically said it has full confidence in the U.S. Treasury, it just doesn't know if the politicians will get out of the way to let it do its job.
"The repeated brinkmanship over raising the debt ceiling ... dents confidence in the effectiveness of the U.S. government and political institutions, and in the coherence and credibility of economic policy," Fitch analysts said.
Billionaire Warren Buffett put the situation best Wednesday morning on CNBC's Squawk Box.
"Credit worthiness is like virginity, it can be preserved but not restored," Buffet said. "So it is crazy to play around with it."
While the U.S. dodged a bullet Thursday, IHS said since the deal only funds the government through January, and extends the debt ceiling to just Feb. 7, the deal might simply serve to set the stage for yet another showdown.
If politicians don't get their act together by then, and another showdown ensues, IHS said confidence in that "full faith and credit" might finally run out:
"Another debt ceiling showdown in January could be the straw that breaks the camel's back."