Fears of market reaction to ongoing US debt talks
In Washington, discussions continue between leaders in Congress to come up with a deal to avert a US debt default. Tentative deadlines have come and gone, and the real one on 2nd August inches closer. That’s when the US government will run out of money to pay off some of its bills. The lack of an agreement is putting the United States in real financial danger.
A lot has been made about what might happen if the US defaults on its debt, or even if it comes close to that nightmare scenario.
This is now a reality, any discussions between Washington’s political leaders will have one aim: to avert a negative reaction on Wall Street when markets open again on Monday. First up though, the Asian markets.
This is why some sort of a deal must be in the making by this Sunday afternoon. The breakdown in talks between US President Barack Obama and John Boehner, the Republican Speaker of the House of Representatives, could spook investors and markets.
Everyone involved in these heated discussions does agree: The US must raise its debt ceiling by the 2nd of August.
This is usually done several times during a presidential term. Congress gives the go-ahead, and the President signs it into law.
But this time around Barack Obama, and leaders in Congress, want to use this opportunity also, to cut the enormous US debt. No-one agrees on how to do this, where to cut spending and where to raise taxes.
The political divide between Republicans and Democrats is there for everyone to see.