U.S. hits debt limit, special measures put in place

Vote PAP OUT to Save SG SG

Geithner: U.S. hits debt limit, special measures put in place

The federal government hits the $14.3 trillion debt ceiling today, the Obama administration announced, requiring extraordinary measures that can stave off a default for a few more months.

In a letter to Congress, Treasury Secretary Timothy Geithner told Congress he will halt investments in two big government pension plans Monday.

Geithner has said that various accounting maneuvers can delay a government default until Aug. 2.

The announcement comes as President Obama and aideswarned that messing around with the debt limit could threaten economic recovery.

"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," Obama told CBS News last week.

White House spokesman Jay Carney told reporters today's milestone on passing the debt limit is "a reminder that we need to have a vote to lift the debt ceiling because the consequences of not doing so would be quite serious indeed. Those who suggest otherwise are whistling past the graveyard."

Congressional Republicans say they will support an increase in the debt ceiling only if the Obama administration proposes major budget cuts.

"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," said House Speaker John Boehner, R-Ohio, appearing on CBS' Face The Nation.

http://content.usatoday.com/communities/theoval/post/2011/05/obama-aide-gvt-hits-debt-limit-special-measures-put-in-place/1

homer28 SG

This whole US financial system is clearly like a ponzi scheme now and the musical chair is getting shorter. A default sound like a better option for the US while it still has the technology and resources for a fresh start. On the other hand, the rest of world who follow US capitalism will pretty much be screwed (especially those who have been bank rolling US govt debt) since the US govt will be like any American who walk out of their underwater mortgages.

Mr Milo SG

Borrow & Borrow to fuel the economy

Basically, building on air.

SG is Pay & Pay to fuel the economy

So which is better?

dragg SG

how can any country service a 10 trillion debt? in fact US cant even afford to pay off the interest.

i dont understand what the whole world is doing. why is US allowed to keep raising the debt ceiling? there will be no end to it right? US debt will keep going up. then what?

anyone knows how this works?

DrLanguage_reborn2 SG

This Obama is a real idiot. In order to finance his medicare, he spend 14 trillion. Everybody blames Bush for subprime but this joker will be known as the idiotic president to plunge the world into Great Depression. USA fundamentals are so shaky that the speculators will have a good time spooking the US markets. The whole world is so badly tied to USA. China, Japan, RUssia, Singapore, Malaysia - everybody bought US bonds. Moody and Standards downgrade US debt, then interest rates start to skyrocket, thats when USA starts to default. China will be in trouble, it will drag Australia and S.E.A and Japan with it.

USA overspends. Just look at them - they have 12 mega aircraft carriers. Each one cost $20billion. Do they need 12 mega aircraft carriers? NASA eats up $100billion a year. Wars in Iraq and Afganistan eats up $200billion a year. USA waste aid money to Pakistan - like $10 billion a year when the country is still sponsoring terrorism. USA waste another $8billion a year to Colombia to eradicate drug smuggling when they can solve it in their own homeland by instituting mandatory death sentence for drug smugglers and save lots of money.

dragg SG

US debt will eventually hurt the rest of the world.

they are delaying the problem, not solving it.

Aneslayer SG

10^14 used to be called astronomical numbers Now its called economic numbers...

If USA defaults, global economy will plunge... China probably would take the no. 1 economy and superpower... Scary... Lucky I'm chimes xp

Rock^Star SG

There's no way back for USA. One of these days, they will have to default because no country will have faith in the US$ anymore. No one will buy their bonds anymore. Our own S$ is projected to surpass it in 5 years time. The writing's on the wall.....they spend so much on anything and everything, from electrical power to oil to military weapons. And they do so much imports, their currency is only going to plummet further.

I guess this fulfills the universal law of history....that no empire can last more than a few hundred years.

Rock^Star SG

And when USA collapses, time to buy stocks and property.

dragg SG

why are we still holding US bonds? 32.4 billion?

Rock^Star SG

why are we still holding US bonds? 32.4 billion?

Not sure how much we have but US bonds are attractive because of the high interest rate they offer: up to 4% per annum if over 30 years. And no one believes that the US will ever default. Many think it's just not possible because of the severe repercussions over the entire world. People would be jobless and therefore countries still continue to buy US bonds to sustain them.

Aneslayer SG

I guess this fulfills the universal law of history....that no empire can last more than a few hundred years.

Unfortunate inevitability...

dragg SG

US dont need to default to cause problems.

at the rate they raise the debt ceiling its only a matter of time everything crumbles. their debt will only get bigger with time. 12 then 21 then 100 trillion?

can the number increase and increase? dont understand wtf the world is doing.

Aneslayer SG

长痛不如短痛.... the next president will have to clean the ceiling fan... full of shit.

βέτά SG

They will keep printing money to devalue their currency till it reaches an equilibrium point. They have to resort to such measure because of unfair currency manipulations by some countries (so they say).

If there is US$100 million in circulation in US, RMB 500 million in circulation in China, say exchange rate is US$1 = RMB 5.

If US prints another US$ 100 million and China still maintain her exchange rate at US$1 = RMB 5, then China would have to print another RMB 500 million to maintain the exchange.

Why you think inflation is so high in China?

China is importing inflation from US.

Aneslayer SG

"They will keep printing money to devalue their currency till it reaches an equilibrium point. They have to resort to such measure because of unfair currency manipulations by some countries (so they say)."

More accurately... The US government has to pay the capital value with interests on the bills they print... to the FEDS. Fed fatsoes...

lce SG

More accurately... The US government has to pay the capital value with interests on the bills they print... to the FEDS. Fed fatsoes...

equilibrium point? wat wld tat be?

Aneslayer SG

equilibrium point? wat wld tat be?

That is quoted from beta's post above... Beta?

lce SG

more like space travel where u can nvr able to contemplate the edge till its too late

Rock^Star SG

If there is US$100 million in circulation in US, RMB 500 million in circulation in China, say exchange rate is US$1 = RMB 5.

If US prints another US$ 100 million and China still maintain her exchange rate at US$1 = RMB 5, then China would have to print another RMB 500 million to maintain the exchange.

Why you think inflation is so high in China?

China is importing inflation from US.

Does it really work that way? lol....There's been a surge of consumption demand by China in recent years and heavy foreign investment which contributes to their own inflation. And it's not so much of US printing money to devalue their currency, they have no choice. Their economy, investments, technology and labour takes so much USD to sustain, not to mention maintenance of military all over the world.