USA: Shutdown deal averts catastrophe but leaves the US economy in peril - by Zachary A. Goldfarb

The deal reached by Congress on Wednesday to end the government shutdown and raise the debt ceiling averts a financial catastrophe but leaves the weakened U.S. economy facing new threats.

The agreement will send about 450,000 federal employees back to work and restart paychecks for the 1.3 million employees who stayed on the job during the shutdown. Getting those salaries back in circulation will help economic growth, particularly in the Washington area.

More important, the threat of a default on the national debt has been avoided, along with the recession and financial crisis that may have accompanied a failure to raise the borrowing limit.

But while the bipartisan deal ends a period of disruption that has slowed the economy — the shutdown removed more than $20 billion in direct government spending and related economic activity — it creates new perils, setting up other economy-shaking deadlines in just a few months.

It also does almost nothing for the country’s existing economic challenges, including automatic spending cuts that are worsening the problem of high unemployment and a long-term debt challenge posed by mounting costs in health-care and retirement programs.

Under the terms of the bipartisan agreement, lawmakers in both parties will spend the next two months trying to hash out a deal that could alleviate some of these risks. But there is little optimism that effort will succeed, given that several similar bipartisan initiatives in recent years have failed over disagreements about taxes and spending.

Read more: Shutdown deal averts catastrophe but leaves the economy in peril - The Washington Post

No Chance of Default, US Can Print Money: Greenspan -Patrick Allen

Former Federal Reserve Chairman Alan Greenspan on Sunday ruled out the chance of a US default following S&P's decision to downgrade America's credit rating.

"What I think the S&P thing did was to hit a nerve that there's something basically bad going on, and it's hit the self-esteem of the United States, the psyche" said Greenspan

Austan Goolsbee, the chairman of the White House's council of economic advisors, hit out at S&P on the same show, insisting the credit ratings agency had got its math wrong. 

For more: No Chance of Default, US Can Print Money: Greenspan - CNBC

US debt deal: China downgrades America's AAA credit rating

Gross US debt surged up $238billion to reach 100 per cent of U.S. gross domestic product after the government's debt ceiling was lifted this week.

Treasury borrowing jumped straight after President Obama signed into law a rise in the debt ceiling as the U.S. threatened to default.

The new borrowing took total public debt to $14.58trillion, over end-2010 GDP of $14.53trillion, and placed it in a group with highly-indebted countries such as Belgium, reported AFP. 

As the official downgrade of the crucial AAA rating inches closer, the Chinese Dagong Global Credit Rating Company announced a slide from A+ to A, citing doubts over Washington's ability to pay off its debts

 

For more: US debt deal: China downgrades America's AAA credit rating | Mail Online

"US to lose AAA credit rating soon" - says former Bush White House advisor - by Nick Evans

Former White House economic advisor Todd Buchholz says a downgrade of the US credit rating is imminent, despite a deal being reached in the deadlock over the debt ceiling this morning.

Speaking at the Diggers and Dealers conference this morning in Kalgoorlie, Mr Buchholz said he believes ratings agencies will downgrade the US credit rating from its current AAA level over the next few months, ahead of the report of a Congressional committee on ways to reign in the US budget.

Republican Congressional leaders reportedly cut a deal overnight with President Barack Obama's administration, which will lift the debt ceiling in exchange for a trillion dollars worth of budget cuts over the next ten years.

For more: US to lose AAA credit rating soon - former White House advisor | Latest Business & Australian Stock market News | Perth Now

US debt deal: a victory for the Tea Party - by Alex Spillius

They would have liked to see greater cuts and a constitutional requirement to balance the budget in the future. They are fundamentalists, so nothing short of total triumph will do.

But make no mistake, they have proved beyond all doubt that the Tea Party calls the shots in the Republican majority in the House of Representatives.


The president was unable to fight back convincingly, and resorted to scare tactics about benefits to the sick and elderly not being paid if the ceiling wasn't raised. He did not sound like a man in control.

The episode has damaged his authority and dimmed his prospects of re-election in 2012. The Tea Party has succeeded in making spending the dominant issue in Washington, even over job creation and the immediate recovery. But the movement played a large part in dragging the country to the brink of disaster, and many voters in the middle ground may not forgive them for that.

For more: US debt deal: a victory for the Tea Party - Telegraph

A U.S. Default Could Benefit Euro Markets, But Don’t Bet on It - by Geoffrey T. Smith

There are some scenarios under which you could argue that a U.S. default would have some benefits for European markets.

For example, a good part of the trillions invested in U.S. Treasurys is there simply because of their supposedly risk-free nature: surely some of it would migrate to the remaining AAA credits in Europe if the U.S. were to be downgraded?

Also, would a default by the U.S., or even a downgrade, not lead people to revise their opinion that the U.S.’s debt is safer than euro-zone debt because it has a better-functioning political system, with a clearer system of fiscal rights and obligations?

For more: A U.S. Default Could Benefit Euro Markets, But Don’t Bet on It - The Source - WSJ

US Debt Crises: President Obama Calls on the American People to Make their Voices Heard - by Nikki Sutton

This morning, President Obama spoke on the status of the debt ceiling negotiations from the Diplomatic Reception Room at the White House. The President urged Republicans and Democrats in Congress to find a bipartisan solution to avoid default that he can sign by Tuesday. Though we are almost out of time, the President made it clear that there are multiple ways to resolve this problem.

For the complete speech click here: : President Obama Calls on the American People to Make their Voices Heard | The White House