US debt ceiling deadline still August 2: Treasury

The deadline for raising the US debt ceiling or risk a
default remains August 2, the US Treasury said
© AFP/Getty Images/File Chip Somodevilla

AFP

WASHINGTON (AFP) - The deadline for raising the US debt ceiling or risk a default remains August 2, the US Treasury said Friday, after speculation that there might be more leeway for politicians to carve a deal.

"The Treasury Department continues to project that the United States will exhaust its borrowing authority under the debt limit on August 2, 2011," the Treasury said in a statement.

"Secretary (Timothy) Geithner urges Congress to avoid the catastrophic economic and market consequences of a default crisis by raising the statutory debt limit in a timely manner."

Political theater clouds US debt ceiling vote

US lawmakers Tuesday hold a certain-to-fail
vote on raising the government's borrowing limit
© AFP/File Shawn Thew

AFP

WASHINGTON (AFP) - US lawmakers Tuesday hold a certain-to-fail vote on raising the government's borrowing limit, revealing political posturing on a issue the White House warns could have "calamitous" economic consequences.

The Treasury says that unless Congress votes to raise the $14.29 trillion debt ceiling by August 2, Washington could be forced to default on its obligations, in a move that would send shockwaves through the global economy.

Opposition Republicans, who won the House of Representatives last November amid a public mood of steep anxiety over the ballooning size of government debt, will only back raising the debt limit in return for steep cuts in the deficit.

Japan shows how to defuse debt time-bomb

Ellen Brown
Asia Times

"Threatening to default should not be a partisan issue. In view of all the hazards it entails, one wonders why any responsible person would even flirt with the idea." -- Alan S Blinder, Princeton professor of economics, former vice chairman of the Federal Reserve.

A game of Russian roulette is being played with the national debt ceiling. Fire the wrong chamber of the gun, and the result could be the second Great Depression.

Nouriel Roubini: U.S. On Track For A 'Fiscal Train Wreck'

Roubini - CFR

Reuters

The U.S. economy is a "fiscal train wreck" waiting to happen that risks ushering in a period of stagnation featuring by minimal growth, high unemployment and deflationary pressure, U.S. economist Nouriel Roubini wrote on Friday.

In a commentary for the Financial Times, Roubini -- one of the first economists to predict the housing crash in the United States and known as 'Dr Doom' for his pessimistic forecasts -- said fiscal and monetary stimulus had prevented another depression.

But he said that further quantitative easing likely to be announced by the Federal Reserve next Wednesday will have little effect on U.S. growth in 2011, "so fiscal policy should be doing some of the lifting to prevent a double dip recession," he said.


He said the U.S. remains on an "unsustainable fiscal course" and the likely make-up of Congress after elections next Tuesday, in which the Republicans look set for strong gains, virtually takes fiscal reform off the agenda.

"The risk ... is that something on the fiscal side will snap ... The trigger could be a debt rollover crisis in a major U.S. state government," he wrote.

"The worst of the coming fiscal train wreck will be prevented by the Fed's easing. But the risk is (Obama) ... will then preside over ... a Japanese style stagnation, where growth is barely positive, and deflationary pressures and high unemployment linger."

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Debt market strips U.S. of triple-A rating

Colin Barr
Fortune

The United States has lost its gold-plated triple-A rating -- in the eyes of credit traders, at least.

U.S. sovereign debt was the third-worst performer in a closely watched derivatives market during the third quarter, CMA said Tuesday in its quarterly review of global sovereign credit risk.

The cost of insuring against a default on U.S. government bonds via so-called credit default swaps rose 28% in the quarter ended Sept. 30, the firm said.

That puts the United States' third-quarter performance behind only two other nations, both of which are struggling with the early stages of sovereign debt crises: Ireland, whose CDS prices rocketed 72% to a record amid growing questions about the costs of a massive bank bailout, and Portugal, whose costs jumped 30%.

What's  more, the decline leaves U.S. debt trading at an implied rating of double-A-plus for the first time in memory.

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