Monday, August 1, 2011

US Likely to Avoid Debt Default

It seems that the US will avoid a potential debt default. After weeks of following this issue on and off, I was quite amazed at the amount of politics at play here. It seems that congressional leaders will most likely approve a deal to raise America's debt ceiling. And somehow I don't think the deal was what President Barack Obama wanted as he was initially calling for one, broad debt agreement that included cuts, entitlements and also taxes.

The final deal that will go before Congress this week seems to be a compromise which includes cuts of about $1 trillion and also relying on a bipartisan congressional committee (I will take that to mean comprising both Democrats and Republicans) to propose by November another $1.5 trillion in other deficit reductions that could range from cuts, entitlements or tax increase. This new dealwill pave the way for US to avoid the Aug 2 default.

With this good news, gold prices decline from their record prices while oil prices continue to climb. Will the Singapore stock market also respond positively to the news once the final agreement is reached? It is scary to think that one day away from the deadline, the most powerful nation in the world is leaving it really till the last minute to finalise something as important as this.

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