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Us debt crisis
- 1. WELCOME
- 2. SHOULD U.S. RAISE ITS DEBT CEILING?
- 3. THE FLOW • The Current Scenario • How did they reach here • Why do you need debt ceiling? • The Criticality of the situation • Issues if they raise and if they don’t raise the ceiling • Open Forum
- 4. CURRENT SCENARIO • US $14.29 trillion • 96% of GDP • AAA rating since 1917
- 5. Have High Debt and High Rating Why US has been able to raise so much money
- 6. THE DOLLAR • Largest industrial base and surplus of dollar backed by Gold post 2nd world war. •1971: The Dollar was fixed as Reserve Currency. • 1973 oil crisis: Increase in US treasury bills held by central governments •As a result demand for Dollar increased in the world arena.
- 7. WHO IS HOLDING THIS DEBT
- 8. DEBT CEILING
- 9. DEBT CEILING • Limits the amount of public debt that can be outstanding. • Prevents the U.S. Treasury from issuing new debt once the limit has been reached.
- 10. IMPORTANCE OF DEBT CEILING
- 11. IMPORTANCE OF DEBIT CEILING • Provides Congress with the strings to control the federal purse • A form of fiscal accountability • Compels Congress and the President to check their debt borrowings
- 12. But you can always increase it
- 14. The REASONS From a forecast annual surpluses of $850 billion for 2009–2012 to deficit reality of $1,215 billion
- 20. How serious is this issue of Debt ceiling
- 22. Default in Employment payment
- 23. Default in Employment payment Inflation
- 24. Default in Employment payment Inflation Exchange Rate
- 25. GDP Default in Employment payment Inflation Exchange Rate
- 26. GDP Default in Employment payment National Income Inflation Exchange Rate
- 27. GDP Default in Employment payment National Income Stock Market Inflation Exchange Rate
- 28. GDP Default in Employment payment National Income Stock Market Inflation Exchange Rate Dollar Value
- 29. GDP Employment Default in payment Interest National Rates Income Stock Market Inflation Exchange Rate Dollar Value
- 30. IF THEY DON’T RAISE THE DEBT CEILING
- 31. • Decrease in Expenses • Effect on Stock Market • Sky High mortgage and Interest rate • Treasury Bond Collapse
- 32. BUT WHAT IF THEY RAISE THE DEBT CEILING
- 34. Dollar weakens
- 35. Imports • Imports become dearer. • End up paying more money for same quantity of goods purchased. • Pace of economic growth rate slows down.
- 36. Exports • Exports become cheaper. • Importer country ends up buying same amount of goods for a lesser price. • As a result of increase in exports, the trade deficit might decrease.
- 37. INFLATION • As imports get dearer, inflation increases. • Prices of goods increases.
- 38. INTEREST RATES • As a result of increase in inflation, the interest rates will go up. • Investor confidence will go down. • As a result the investment in the economy will go down.
- 40. CAPITAL FLIGHT • Flow of funds or investments from develop to developing countries. • Increases unemployment in the country.
- 41. CAPITAL FORMATION • Investments and capital formation are positively correlated. • As investments go down rate of capital formation goes down. • Hence government needs money to initiate investments and growth in the economy.