The Debt Crisis has been averted, right? Wrong. Congress voted on Monday Tuesday to raise the ceiling from $14.3 Trillion to an astonishing $16.8 Trillion. But America may lose their triple A (Aaa) rating?? Why? It’s the debt load! From Guardian U.K. :
America has moved away from the brink of a catastrophic default after a deal was reached overnight to raise its debt ceiling.
Stock markets around the world briefly rallied on Monday, in relief that the world’s largest economy would probably avoid running out of cash this week. But the agreement, which includes around $2.5tn (£1.5tn) of spending cuts over the next decade, has been criticised on both sides of the political divide, and will probably not save America’s triple-A credit rating.
There is also concern that the deal could still fail to be approved by Congress, which is due to vote on the package on Monday night. Some liberals are angry that the plan, which has been hailed as a triumph for the Tea Party movement, relies on spending reductions rather than tax rises to reduce the US budget deficit. The Democratic leader in the House, Nancy Pelosi, has already warned that some congressional members in her party may be unwilling to support the deal.
Stuart Gulliver, chief executive of HSBC, said the progress made over the US debt ceiling was “very welcome”, but also warned that America could have its credit rating cut.
Trading was volatile when Wall Street opened on Monday. The Dow Jones index gained 100 points, but then swiftly fell to a 100-point loss after the publication of weak US manufacturing data for July. In London, the FTSE 100 had rallied by almost 1.5%, jumping 83 points to 5898, as traders welcomed the news that the US would probably not run out of cash. But it later surrendered all its gains, as investors moved out of shares and into government bonds. This pushed the yield, or interest rate, on the UK 10-year gilt to below 2.8% – a record, according to Reuters.
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