Discussions continue in the US between Barack Obama’s government and the Republicans over raising the debt ceiling. Obama wants to raise the debt ceiling by $US4 trillion, whereas the Republicans want it raised by $US2.4 trillion, with matched spending cuts. The US will default on its debts if the ceiling is not raised by August 2, 2011.
Last week Federal Reserve (Fed) Chairman Ben Bernanke, in his semi annual testimony before Congress, expressed his direst warning on the consequences of failure. He said that if the US defaulted on its debts, then the US Treasury notes could become illiquid.
Rating agency Moody’s has said that “an actual default, regardless of duration, would fundamentally alter Moody’s assessment of the timeliness of future payments and a AAA rating would no longer be appropriate”. Rival rating agency Standard and Poor’s said that it could also cut the US government’s AAA rating if it missed any debt obligations including social security payments.
No comments:
Post a Comment