USA to shut down on Monday

[Workingman]

If a new funding bill is not passed this weekend the US government will run out of money to pay most staff; millions will be laid off without pay and no chance of it being back-dated. Pay cheques and pensions will not be paid, nor will those companies and individuals on government contracts.

If that wasn't bad enough the country will hit the debt ceiling - the point at which it willl not be able to borrow - by mid October. The limit is currently $16.7 trillion and it needs to rise to stop the possibility of the US defaulting. One figure being touted was $19.3 trillion.

A bit of a mess?

[cromwell]

It certainly sounds like it. Am I reading this right WM? Even if the US government dodge the bullet next week, they will hit their debt ceiling soon and the scenario of people not getting paid comes round again?

[Kaz]

[Workingman]

Cromwell, the details are a bit scarce; the two issues appear to be related, and from what I can gather it goes something like this.

Monday is an argument about how the budget is spent, not about its size. Democrats believe a lot should be spent on health care; the Republicans think that amount is too high and want it spent on other things.

The debt ceiling is the amount the government can borrow to pay off its debts: the interest on the money it has already borrowed, the budget and so on. Unless the limit is raised It is predicted to hit the ceiling by October 17th at which point the US will have to make some tough choices over who gets paid and at what level, or it could default. This is the second time this year the problem has been raised.

Borrowing more to get out of debt looks like Carol Vorderman economics to me.

[Suff]

This has been on the cards for two years now. Ever since the USA hit 100% of gdp in debt.

The Republicans want less spending and the Democrats want to keep going regardless of cost.

Every time it has been a penis measuring contest. The Republicans always fold in the end.

Needless to say this can't keep on escalating. There are probably three more years of this left before it all falls apart.

In the end the us must grow their economy very rapidly or they will default.

That will be very interesting times indeed. .....

[KateLMead]

How the mighty can fall!

[TheOstrich]

The Tea Party element of the Republican Party is totally against the Obamacare policy and wants that postponed a year as a quid-pro-quo for passing the budget.

Obama is effectively being turned into a lame duck president - it will be interesting to see who blinks first ....

[Workingman]

The last time it happened, 1995, it lasted 21 days. If it does happen again, and go on that long, it will run up against the debt ceiling debate. That might concentrate a few minds.

ETA The discussions failed, so the shutdown has begun.

[Suff]

The press are like salivating dogs.

Attack a couple of countries and the US budget goes off the front page....

It's still the biggest story since the financial crisis. People don't get it. I, for one, could wind up out of a job is the US defaults, quite easily. People don't seem to understand the fundamental issue with the US defaulting. It's not Greece or Iceland, any of the top 10 nations could have fixed their mess for them without them defaulting. No the US is a much bigger problem. The US is the world reserve currency, countries hold US $ to balance their currency and stabilise their own finances.

If the US defaults, the whole world defaults to one degree or another. If the US $ drops 40% in value, so does a large proportion of the financial reserves held in many countries banks.

When the Democrats are saying things like "The Republican's won't take Yes for an answer" and the Tea Party members are saying things like "I won't pass a budget to pay the US debts without concessions", we are in a whole different position to 1995. The last time this happened, the Republicans were unhappy about Clinton's proposals for welfare. But the US was not in debt for more than GDP and the gap between debt and GDP was not growing larger every single month.

This is one to watch and the press are off chasing "money makers" rather than reporting the mundane world shaking events going on right now.

Typical.

[Workingman]

The two news outlets with the largest reach in the UK, BBC and Sky, are usually infatuated with all things US. We are fed every scrap of news, from the President blowing his nose to dog's stuck down drains.

At the moment, though, they are like the Mojave desert as far as the US is concerned.

You will have to search far and wide to learn that Lockheed and United Technologies, US government contractors, are laying off staff unpaid. News that US banks are stockpiling dollars to keep the ATMs working should raise a few eyebrows, but no. If it goes on for much more than a week it could hit housing recovery - and we all know what happened the last time US housing crashed.

But never mind, Twitter wants $1bn from its IPO, so everything is fine in the world.