Less than 3 weeks to possible US default: President VS Congress

The info-analytic service of Market Leader and the U.S. Association of Trader and Investors under Masterforex-V Academy previously wrote about the problem of the USA’s budget deficit for a couple of times. They considered the reasons, possible consequences and tried to anticipate the future succession of events.

Of course, Masterforex-V Academy experts have recently been focused on the measures taken by the U.S. Government, Congress and President in order to solve the problem.

It is obvious that there is no need to explain once again why investors around the world are seriously concerned about the current condition of the world’s biggest economy. That is why any speech made by Barack Obama or any political piece of news from Washington are paid special attention to. We remind you that in order to avoid a technical default the U.S. Congress will have to lift the debt ceiling until August 2^nd.

If the USA defaults on its debt, that will be a real shock for the entire global market and global economy.

 The world is waiting for a major decision

·         Anticipating a default. On July13^th CBS News reported breaking news. President Barack Obama said: “I cannot guarantee that those [27 million social security] checks go out on August 3^rd if we haven’t resolved this issue because there may simply not be the money in the coffers to do it”.

·         Almost no time left. It is more than 2 weeks till August 2^nd but the decision to lift the debt ceiling needs to be made earlier in order to have enough time to resolve a range o procedural issues.

·         Tough talks. The issue must be resolved without delay. That is why both the “Republican” Congress and the “Democratic” White house   will have to decide on the problem within a week or so. The closer August 2^nd is the tougher the talks become.

·         No visible results. Obama’s latest statement confirms that the talks have reached a deadlock.

Both the sides know perfectly well that the government will be able to lift the debt ceiling only after both the houses of the US Congress approve the decision. However both the parties understand that it is a good opportunity to manipulate the political opponent.

What are the Democrats’ conditions?

1.       The President as the leader of the Democrats understands that his actions well may be criticized by his party. However he is determined to make significant concessions to the opposing party.  The White House is ready to cut the expenses on numerous healthcare programs (including Medicare and Medicaid), social security programs. Substantial defense and security cuts are considered as well.

2.       In the meantime Obama’s Administration insists on raising taxes and eliminating numerous tax rebates and privileges for rich people and corporations.

3.       Obama wants the Congress to make a long-term agreement on the debt ceiling, not a temporary solution.

4.       Of course, the ruling party is trying to avoid the catastrophe (a possible default). The reasons are obvious: if it happens Obama won’t ever be reelected, not to mention a heavy blow to the US and global economy.

What are the Republican’s goals?

 

 

·         If the Republicans approve a new debt ceiling it will be a concession itself. They are definitely not going to increase taxes for 2 reasons:

ü On populist grounds

ü It will affect big-scale corporations, which is not beneficial for the Republicans.

·         Substantial spending reduction is the main requirement. First of all it concerns the country’s social sphere. Now the Republicans want to deprive them of their trump cards.

·         The Republicans’ major goal is to make full use of the situation in order to increase their ratings and to win the forthcoming presidential elections.

Will the issue finally be resolved until August 2^nd?

Numerous analysts say that the situation is next to unsolvable. Both the parties show their principle stands and are unwilling to make concessions to each other. Another major question remains to be without an answer: Should the long-term plan of public debt reduction be based on the intention to gain extra income or on the reduction of public spending?

The talks are being held on a daily basis. There has been no serious improvement so far but everyone keeps hoping for the best.

According to the Department of Masterforex-V trading system , the price of the USD futures is in a narrow price range of Daily/Weekly. The futures movement will be determined by the direction in which the price will come out of the range. If the upper border is broken, the next resistance level will be found at 78,92. A break below the lower border will initiate a bearish downswing – wave C of Daily/ Monthly.

 

 

Market Leader and Masterforex-V Academy would be very grateful to you for participating in a survey. Please, visit the Academy’s forum and answer the question given below:

Will the Congressmen finally approve the decision to lift the debt ceiling until August 2^nd?

·         Yes, they will

·         No, they won’t

·         Your own opinion

 

 

 

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