The Down Range Forum
Member Section => Politics & RKBA => Topic started by: philw on May 17, 2011, 02:02:31 AM
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'Worse crisis' likely if debt ceiling not lifted
By business editor Peter Ryan
Updated Mon May 16, 2011 3:40pm AEST
Barack Obama has warned of global financial chaos if the United States' $14 trillion debt ceiling is not raised soon.
The US president says any signal that the world's largest economy might default on even some of its debt could spook financial markets and plunge the nation into another recession.
America's debt clock is racing towards midnight - with the current limit for borrowings of $US14.3 trillion set to be reached on Monday US time.
Soon, US debt will be through the ceiling with the government adding about $US135 billion every month just to keep current programs running.
President Obama is in a battle with both Democrats and Republicans to have the ceiling raised to around $US21 trillion.
But speaking in a town hall meeting broadcast by the CBS 60 Minutes program, president Obama spoke of the unthinkable and the potentially catastrophic impact that even talk of a US debt default would have on the global financial system.
"If at any point somebody thought, if investors around the world thought, that the full faith and credit of the United States was not being backed up, if they thought that we might renege on our IOUs, it could unravel the entire financial system," he warned.
"We could have a worse recession than we already had, a worse financial crisis than we already had."
With the deadlock set to continue, the US Treasury department is reallocating funds to ensure debt obligations are met for the time being.
In the meantime the Obama administration is try to reach a compromise, although Republicans are refusing to increase the debt limit without deep spending cuts.
House speaker John Boehner says Barack Obama needs to look at everything, including defence and Medicare, but has once again ruled out tax increases on the wealthy to fund the debt.
"I've not seen real action yet and I just think this is the moment. We all know what the problems are. Why don't we just deal with them?" he questioned.
"No more kicking the can down the road, no more whistling past the graveyard, now is the time to deal with the fiscal problems we have in an adult-like manner.
"Everything should be on the table except raising taxes, because raising taxes will hurt our economy and hurt our ability to create jobs in our country."
It might be political brinkmanship, but the prospect of a US debt default is something that financial markets are watching with trepidation.
"I think any form of default on US debt would be seen as catastrophic for financial markets," said Shane Oliver, the chief economist at AMP Capital Investors.
"Obviously it would cause a big loss of confidence in US debt at a time when there is plenty of that debt around and, of course, America is incredibly reliant on it given its massive 10 per cent of GDP budget deficit."
He says that, for now, it is an American problem, but anything even close to the downgrading of America's rolled gold AAA credit rating would bring a new wave of worry for the world, and Australia would not be immune.
"On the one hand, the good news is that Australia doesn't have a debt problem so, in that sense, we are not overly reliant on debt markets globally and so there is not going to be any contagion in Australia's direction," Shane Oliver explained.
"The downside, though, is that if there is anything which threatens the US recovery, and of course the failure to agree on increasing the debt selling could well do that because it could put a cloud over the financing of US, of America's budget deficit, if that uncertainly builds and that has a negative impact on US economic growth then that of course would have a negative impact on Australia."
Shane Oliver says those flow on effects would include higher borrowing costs for Australian households and banks, as well as lower commodity income.
"I think if there was no resolution on the debt ceiling issue, there would be two potential impacts for Australia. One is that US bond yields over time could be pushed up to higher levels which could mean that Australian companies and banks borrowing abroad might have to pay more to obtain that money," he said.
"The second effect could be that if the debt debates and ongoing pressure in the US starts to threaten the US economic recovery, then that of course would also have an impact on Australia, for example their demand for exports and commodity prices as US economic weakness could then flow on and hurt China."
Tags: business-economics-and-finance, economic-trends, international-financial-crisis, united-states
First posted Mon May 16, 2011 2:28pm AEST
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Updated 8 hours 44 minutes ago
Real estate mogul and reality television star Donald Trump announced he would not seek the Republican presidential nomination in 2012, breaking off a controversial flirtation with politics.
"After considerable deliberation and reflection, I have decided not to pursue the office of the presidency," he said in a statement.
"Business is my greatest passion and I am not ready to leave the private sector."
The developer, 64, had openly flirted with a White House run over the past few months and made a healthy showing in some opinion polls, despite scepticism and outright mockery among the US political establishment.
Mr Trump drew attention - and attacks - by advancing already discredited charges that president Barack Obama had concealed his birth certificate to hide that he was foreign born and thus ineligible for the White House.
But political analysts suggested from the start that Mr Trump, a relentless self-promoter, was chiefly looking to beef up the potential audience for his reality television show and would not run for president.
"This decision does not come easily or without regret," he said.
"I maintain the strong conviction that if I were to run, I would be able to win the primary and ultimately, the general election."
Mr Trump was the second high-profile potential candidate in days to rule-out a Republican White House run after former Arkansas governor Mike Huckabee, a favourite of religious conservatives, said over the weekend he would not seek the party's nomination.
With many Republicans grumbling that their party's field of candidates lacks a political star to take on Mr Obama, Mr Trump vowed to keep speaking out "loudly" but did not endorse any of the other potential White House hopefuls.
"I look forward to supporting the candidate who is the most qualified to help us tackle our country's most important issues," he said.
Mr Trump also said he was "hopeful that, when this person emerges, he or she will have the courage to take on the challenges of the office and be the agent of change that this country so desperately needs".
- AFP
Tags: arts-and-entertainment, television, world-politics, human-interest, people, united-states
First posted 10 hours 52 minutes ago
http://www.abc.net.au/news/stories/2011/05/16/3218127.htm
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Spendaholics always tell you that they can not stop spending so the only option is to take away their ability to make debt. Having known a few like that I can assure you that they will look you in the eye and justify ruining themselves financially so why let one have so much political power and ruin us? Government can't be all things to all people from cradle to grave!
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John Maynard Keynes rode "the little bus".
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I knew financial disaster was coming to this country a long time ago, just didn't know when or how bad.
"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years."
— Alexis de Tocqueville