Editorial: Debt And Bruises - An Economy On The Brink?
"A bruise is a lesson....and each lesson makes us better." George R. R. Martin (1948 - )
Well, it’s back. Cometh a new year, cometh a new round of US debt ceiling crisis with the concomitant fear-mongering, horse-trading, back-biting and a whole host of other hyphenates that should not really rear their ugly syllables when $17.2 trillion are on the line.
Absent concord on Capitol Hill, this Friday, February 7th, the Treasury Department will be forced to use "extraordinary measures" to ensure that the government can continue to fulfil its financial commitments in full and on schedule.
At the same time as the new chair of the Federal Reserve, Janet Yellen, was officially sworn in for her four-year term, the global markets nosedived as looming debt ceiling concerns met a maelstrom of worse than expected US manufacturing numbers and evidence that the Chinese economy is slowing, with GDP growth at its lowest rate since 1999.
It is likely that these extraordinary measures would bolster the payment of government obligations for a matter of weeks and would dry out by March or April. And as well as spelling disaster for those at home, those countries whose economies are pegged to the dollar would also bear the brunt of a potential US default – including the oil-rich Gulf Cooperation Council nations whose products flood the international hydrocarbons markets.
As we documented the last time that the US faced the debt wall, there is also the small matter of the US owing more than a quarter of a trillion dollars to oil exporting nations.
Since Obama came into office the debt ceiling has been increased by $5.385 trillion and suspended twice. It is only a matter of time before bruises start to speak of abuse….
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