American Debt-Ceiling Crisis
Executive Summary
The cause of American debt ceiling crisis was the substantial increase in defense expenditure continuing recession in the domestic economy, which led the government had to borrow more than the legal limit. There has been a long bitter debate of whether or not to raise the debt ceiling since this would influence a lot on capital market. Advantages of this measure is rising the debt ceiling would avoid disruption on treasury financing market, which is widely used as collateral. And it would also avoid default on existing debt so that government can borrow more to do the promised payment. However, drawback of this measure is that raising the ceiling would devalue the dollars and made US lose its trade position. And it would be a good assurance to international market showing US would make the spending relevant if not rising. Besides, the downgrade of US credit rating makes international investor lose confidence on US debt, and US debt will have to put a higher interest rate.
Besides, the improved debt ceiling and the cutting spending will lower the employment and the demanded consumption which hinder the economy growth of United State, and then the weakened US dollars fade the benefit of as the main resource supplier of China of Australia to expand .its economy. Nevertheless, the holders of US treasury bonds have to keep holding these securities to protect their value which cause the falling in the yield of treasury bonds. And Australia as a high credit rating and low debt country, its treasury bond may as an alternative choice for the investor.
The down term of US economic caused the bankruptcy of companies in US, which caused the demand for import decreasing and affect the other countries export, furthermore massive money printing in US caused the US dollar depreciated and pushed up the price of dollar-denominated bulk commodities, and the revenue for other countries’ companies would decrease, and share market would also decrease. When the
The cause of American debt ceiling crisis was the substantial increase in defense expenditure continuing recession in the domestic economy, which led the government had to borrow more than the legal limit. There has been a long bitter debate of whether or not to raise the debt ceiling since this would influence a lot on capital market. Advantages of this measure is rising the debt ceiling would avoid disruption on treasury financing market, which is widely used as collateral. And it would also avoid default on existing debt so that government can borrow more to do the promised payment. However, drawback of this measure is that raising the ceiling would devalue the dollars and made US lose its trade position. And it would be a good assurance to international market showing US would make the spending relevant if not rising. Besides, the downgrade of US credit rating makes international investor lose confidence on US debt, and US debt will have to put a higher interest rate.
Besides, the improved debt ceiling and the cutting spending will lower the employment and the demanded consumption which hinder the economy growth of United State, and then the weakened US dollars fade the benefit of as the main resource supplier of China of Australia to expand .its economy. Nevertheless, the holders of US treasury bonds have to keep holding these securities to protect their value which cause the falling in the yield of treasury bonds. And Australia as a high credit rating and low debt country, its treasury bond may as an alternative choice for the investor.
The down term of US economic caused the bankruptcy of companies in US, which caused the demand for import decreasing and affect the other countries export, furthermore massive money printing in US caused the US dollar depreciated and pushed up the price of dollar-denominated bulk commodities, and the revenue for other countries’ companies would decrease, and share market would also decrease. When the