235 years ago today...

[Scouser]

Ivan, sorry...here is what I think -


Why is America facing a debt crisis?


In short, because it is not allowed to borrow any more money. The US national debt cannot legally exceed a debt ceiling of $14.29 trillion (£8.86tn) – a seemingly huge amount, but one which was reached in May.


So what happens next?


Either the US raises the debt ceiling (and can then issue more debt), or it does not (and is then barred from borrowing to pay its bills – such as social security and the health insurance programme Medicare). With a 2011 deficit of at least $1tn, the stakes are high.


Why doesn't Obama just raise the ceiling?


Because the leader of the world's largest economy does not have the authority. Any changes to the debt ceiling need to be approved by Congress, and this has led to a protracted stalemate between Republicans and Democrats.


Why can't the two sides agree?


Both sides realise that the US debt needs to be brought under control, but have rather different ideas about how to do it. Obama is proposing a 10-year, $4tn package of spending cuts and tax rises – including higher income taxes. The Republican party supports a $2.4tn package of spending cuts, but is not backing the tax rises.


How has America been keeping afloat since May, when the debt ceiling was reached?

By stopping payments to certain federal pension schemes, and by liquidating some of the scheme's assets. Treasury secretary Tim Geithner has pledged that the shortfall will be repaid once the ceiling is raised.


How urgent is the situation?


The US treasury estimates that funds will dry up on 2 August. However, the deadline is actually 22 July– to give time for legislation to be written and approved.


Has the debt ceiling often been raised?


Many, many times. More than 70 times since the mid-1960s, and 10 times in the last decade. It's not been entirely one-way traffic, though, since Congress did vote to lower the limit twice in the 1950s, during America's postwar economic boom.


Without a deal, will the US immediately default on 2 August?


Not according to Ben Bernanke. The Federal Reserve's chairman told Congress on Wednesday that the first response would probably be to cut social security payments, Medicare and military pay.


How are the markets reacting to the deadlock?


Until very recently, the view in the City and on Wall Street was that a deal would be reached in time. However, investors are starting to get edgy. Moody's has warned that a US default is unlikely, but no longer unthinkable, and put America's credit rating on negative watch. On the bond markets, however, US 10-year bonds are trading with a yield, or interest rate, of just 2.9%. The suspicion is that neither side wants to take the blame for pushing the US into a new financial crisis.


What impact would a default have?


Some experts have predicted a major panic. Standard & Poor's has made it clear that it would cut the US rating from AAA (the top) to D (the bottom). That would mean banks would technically be barred from using US debt as collateral with central banks (although these rules could be changed). As Gary Jenkins of Evolution Securities put it: "They wouldn't dare, would they?" Even Bernanke has conceded that failure to lift the US debt ceiling would throw the financial system into tremendous disarray.


Why doesn't the president have unfettered powers to set the debt ceiling himself?


Article 1, section 8 of the United States constitution says only the US Congress has the power to allow America to borrow. Originally, this meant that every loan had to be signed off individually. But in 1917, Congress agreed a limit for the first time. This legislation, called Second Liberty Bond Act, funded America's entry into the first world war. The modern debt ceiling – the limit on all public debt – was created in 1939, set at $45bn.

[withahip]

Ivan, sorry...here is what I think -


Why is America facing a debt crisis?


In short, because it is not allowed to borrow any more money. The US national debt cannot legally exceed a debt ceiling of $14.29 trillion (£8.86tn) – a seemingly huge amount, but one which was reached in May.

Strange, that is also what The Guardian thinks:
http://www.guardian.co.uk/business/2011 ... nd-answers

If you are going to cut and paste your opinion, at least give credit to the person who told you what you think.

[fat cherry]

Thus speaks mr copy and paste himself

[withahip]

Thus speaks mr copy and paste himself

I don't claim them as my personally created thoughts or writings.

[girlwithnoname]

A good way to reduce the US national debt...

[Scouser]

I don't claim them as my personally created thoughts or writings.

I was brought up on the News Of The World - any journalism is fair game to pass off as my own in my book.

Not that I have written a book. But I had it would be culled from several sources and credited to me.

Like Chris Adams.

[Voodoo Billy]

But I had it would be culled from several sources and credited to me.

Like Chris Adams.

Chris Adams was credited to you? Bloody hell, how old are you?

[withahip]

I was brought up on the News Of The World - any journalism is fair game to pass off as my own in my book.

Not that I have written a book. But I had it would be culled from several sources and credited to me.

Like Chris Adams.

I cannot argue with this. I have been warned.

But Chris Adams is American. Oh yes, I forgot . . .

[Scouser]

Chris Adams was credited to you? Bloody hell, how old are you?

Very

[fat cherry]

I don't claim them as my personally created thoughts or writings.

he said 'this is what i think', not 'i have written these words'. though how cool would it be if one of our brethren, scouser no less, was a guardian journo. we could all dine out on that, even if it was just down at the local dunkin donuts.

[Dave Smith]

Another quality thread.Warming up nicely on here again.

[fat cherry]

indeed, reading my last post it could be readby those with a mind to do so as an insult to old scouser and thats not meant to be the case. JUst a thought that after writing some erudite column for a broadsheet newspaper the journo is observed frantically banging away at his iphone and as the camera cuts away it turns out to be scouser writing one of his anti 21st century bunnymen rants. Just a fleeting thought.

[Scouser]

The US faces the prospect of a "catastrophe" as President Barack Obama stands firm against Republican demands for deep spending cuts without any tax increases as the condition for raising the country's borrowing limit and avoiding a debt default.

With Washington gripped by a growing sense that it may be too late to avert a crisis, the president has said he will give the increasingly rancorous negotiations until the end of next week to reach agreement on the terms for raising the US's $14.3 trillion (£8.9tn) debt ceiling.

The White House has said that if there is no agreement by 22 July, then discussion about budget cuts and taxes should be abandoned in favour of legislation dealing solely with raising the debt ceiling before the borrowing limit is reached on 2 August. But the Republicans have rejected legislation without agreement on budget cuts.

With European leaders also facing a potentially ruinous debt crisis, a leading Wall Street figure described the prospect of a US default as catastrophic.

Jamie Dimon, chief executive of JP Morgan, one of Wall Street's biggest banks, said: "No one can tell me with certainty that a US default wouldn't cause catastrophe and wouldn't severely damage the US or global economy. And it would be irresponsible to take that chance."

On Wednesday, Ben Bernanke, the chairman of the Federal Reserve, warned of a "huge financial calamity" if a political agreement is not reached. He told Congress a default would "send shockwaves through the entire financial system".

Hours later, the credit ratings agency Moody's warned that it may downgrade the US's AAA credit rating, saying there is a "rising possibility" that no deal will be reached by next month's deadline.

On Thursday, Moody's threatened to downgrade the AAA ratings of government lenders Fannie Mae, Freddie Mac, Federal Home Loan Banks and Federal Farm Credit Banks, illustrating the vulnerability of the already depressed housing market to a government default.

Talks continued on Thursday but failed to make progress. Obama told congressional leaders that unless a framework deal is agreed on Friday then negotiations will continue through the weekend.

China, the US's biggest creditor, added to the pressure on Thursday by publicly urging Washington to protect investors' interests. The dollar continued its fall as investors shifted to other assets such as gold, which hit a record high on Thursday.

At the heart of the political wrangling is a determination by each side to blame the other for a stagnant economy, with unemployment remaining stubbornly high at above 9%. The latest economic figures showed only a 0.1% increase in retail sales and a minor drop in the number of new jobless claims – by 22,000 to 405,000 last week – suggesting the rate at which companies are laying off workers is falling.

If the debt ceiling is not raised by 2 August, Obama will be forced to decide which parts of the government to shut down and which to keep going using continuing tax revenues, as well as how much of those revenues to direct to meeting payments to foreign holders of US bonds.

The president would have to decide whether to cut off unemployment benefits for those out of work and pension payments to the elderly. He might freeze the military payroll, a large expense but a move bound to bring stinging attacks from the Republicans. Many, if not all, government offices would close.

"You would have to make heinous choices about which bills you would pay," said the White House press secretary, Jay Carney.

The Republicans propose $2.4tn in immediate spending cuts with no tax increases. Obama says the scale of those cuts demanded by Republicans can be reached, but only in several stages, and that tax increases are essential to reduce the deficit.

But the Republicans won control of the House of Representatives in November's election on a platform of promising no new taxes. Newly elected members fear compromise will cost them voter support.

Concern that agreement will not be reached has been reinforced by Republican claims that Obama stormed out of a meeting on Wednesday evening.

Eric Cantor, the House majority leader, said the president "got very agitated, seemingly" and quoted him as saying: "Eric, don't call my bluff. I'm going to the American people with this." Democrats disputed the account.

Prospects for a deal are further undermined by divisions within the Republican party. House Republican leaders believe much of the country will blame Obama for any economic consequences of a default on the debt. But the party's Senate leadership is more sceptical.

The Republican leader in the Senate, Mitch McConnell, fears his party will share the blame if the US defaults on its debt and the economy suffers. "I refuse to help Barack Obama get re-elected by marching Republicans into a position where we have co-ownership of a bad economy," he told a radio show.

McConnell noted that a shutdown of the government in 1995 helped re-elect Bill Clinton as president the following year after voters blamed Republican leaders in Congress. He has attempted to buy the Republicans a way out by proposing Congress hand over power to raise the debt ceiling to Obama without first approving spending cuts. That would shift responsibility for increased spending to the president and allow the Republicans to say they worked to keep to their commitment.

But McConnell's proposal was rejected by his own leadership in the House of Representatives, which fears anything short of substantial spending cuts will be viewed as betrayal by Republican voters.

[Voodoo Billy]

Well it'll save me buying a newspaper. Now all we need is a sports page and a couple of nice juicy tits on page 3 and we'll be there.

[fat cherry]

ivan's a tit. any volunteers for the other?