The fact remains that the euro crisis is no longer the center of attention. Rather, the concern has witnessed a drastic shift towards the issue pertaining to US financial standoff. It certainly will not be an erroneous claim to make US political gridlock is considered to be the greatest threats to world economies worldwide. An annual autumn meeting will be held between Wolfgang Schäuble and President Jens Weidmann. The burning hot topic that will be discussed is the present financial turmoil that US is presently suffering.
Hold Adverse Effect
In the meeting held, it was clearly brought to light the fact that the continued uncertainties that the US market faces are doing least benefit to the overall global scenario. The debt ceiling is also not doing any sort of benefit to the international market, as well. According to Christin Lagarde, the government shutdown has indeed caused an adverse impact on the governmental agencies existing in US. Also, it was made clear that if the government is not successful in its continued effort to increasing legal debt ceiling, the situation would truly become worse.
Raise Necessary Amount
Unable to facilitate a high government borrowing limit will certainly hold a further negative impact on the economy of America. The urgency of the situation can always be understood by coming to terms with the vital piece of information that US debt limit is presently at not less than seventeen trillion dollars. You need to realize the truth that if the amount is not raised on time there remains every possibility that the economy will go bankrupt. Also, the matter seems to be further disheartening in realizing the truth that US borrows an amount of two billion dollars as compared to the amount it earns from different sources.
Few Major Consequences
Have you even made an effort to learn as to what might be the effects of financial US standoff? Well! The consequences are enough to make you understand the negatives that remain associated along with US financial standoff. Some of the ways in which US financial standoff can make a significant impact on the overall scenario include; international market collapsing and the dollar going into free fall, as well. You also must understand that US government bonds can experience a major dip in their attractiveness, as well.
Aspect Of Junk Bonds
One of the other consequences of US financial standoff is that the rating agencies might have to downgrade credit rating. It will also no longer be possible to use US government bonds as a deposit at the US Federal Reserve. However, it needs to be understood that Federal Reserve is already accepting junk bonds as a part of the unconventional monetary policy. There remains least doubt about the truth that such a situation can indeed prove to be a lot problematic for pension funds.
One of the other ways in which US financial standoff holds a detrimental effect on the global economy is that the same holds severe detrimental effects on price stability, as well. The same can also hold an effect on the prospect of the country in the industry pertaining to exports. It is important to wait to let the cheap money end as soon as possible; else the global and financial crisis can flare up easily.
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