By Vestnik Kavkaza
According to analysts, the U.S. expects a default by mid-February. Global markets are also unstable expecting for the solution of the problem of fiscal cliff in the U.S. This was stated by Russian President Vladimir Putin at the Kremlin meeting on economic issues. In 2011, the default was averted just a day before the announcement.
Victor Supyan, deputy director of the Institute of the U. S. and Canada
Over the last 70 years the U.S. debt ceiling was raised 74 times by both Republicans and Democrats. Moreover, when the Republican Party was in power, this was done more than 50 times, and the rest was done by Democrats. Why are there so many rumours on this topic, and should we consider it it as being something catastrophic that could dramatically change the situation in the U.S. economy and the global economy? Indeed, recent events made this issue very serious, because, as we know, the last time, a year ago, the national debt ceiling was raised to over $ 16 trillion, and this problem was solved extremely difficult. There were heated arguments and heated debates between Democrats and Republicans, everyone tried to negotiate some pros, preferences in this dispute. But, nevertheless, as we have all seen, a compromise was reached. It was also reached now, in December last year, when this so-called default was delayed for two months, the automatic spending cuts were also delayed - they would be made if the decision on taxes and spending had not been reached. But it has been achieved, since it appears that both parties, despite all attempts to gain unilateral political and economic advantages, still understand the extent of their responsibilities and the degree of responsibility of the U.S. economy and policy around the world.
Raising the debt ceiling increases the U.S. national debt. On this occasion, there are a lot of discussions. We can often hear the judgment that the United States is generally a bankrupt country, a country that lives by the fact that it prints wholly unsecured money. This is the source of the problems that stem from the U.S. and world economy. Is this true? Let's answer a simple question. If the U.S. would simply print money, which often can be heard in various judgments, would it make sense to have any public debt? Why do they need this debt? What is a debt that must be served? Each year, the Americans spend approximately 250-270 billions of dollars from the federal budget to service the debt. The feature of the U.S. debt is that they are, of course, very interested in this money, they are interested in the debt, because it helps them to finance the economy and government spending, and defense, and so on. But there is one curious thing - in contrast to all other debtor countries, the Americans do not borrow money from anyone. Conversely, all other countries ask the U.S. to allow them to buy their government bonds. This is a completely different situation. And it is connected with the fact that, of course, the question is not simple, there are enough discussions on how Americans are printing money, the extent to which they are provided, but formally every printed dollar is provided in government securities. And the documents are secured by all assets of America. What is the mechanism of this process? Indeed, the question is ambiguous. There are different opinions, not only among media people, but also among experts. However, once again, the specifics of the U.S. debt is that there is confidence of the world economy in the U.S. federal treasury bonds as the most reliable means of storing excess free financial resources.
Second, never before this American system, the Federal Treasury, let down any of its depositors, and it always paid very carefully on its obligations.”
Mikhail Khazin, president of expert consulting company "Neocon"
Talking about the debt ceiling is just ridiculous; it is the next performance which is played to the people. In general, it is clear that it is desirable to complete it somewhere half an hour before the crucial moment, but this meaning does not change, so it's not even interesting to discuss it. If we talk about the problem that the national debt began to grow rapidly, the problem, again, is not the U.S. national debt; the problem is that the falling private demand is now funded through the debt. There is a serious problem, because the effectiveness of this mechanism falls with increasing budget spending. In other words, it cannot continue for a long time. If private demand falls, it automatically means a fall of the U.S. GDP. Today, the U.S. household demand is more than the real disposable income by about three trillion dollars a year. Those trillions cannot be compensated through budget only. In general, there are very serious problems which cannot be systematically, strategically solved, but tactically it is possible - so far, at least. By some estimates, the exhaustion of the resources will end this autumn, but there is also a question. Therefore, in general, there is no doubt that something should be changed in the policy. Apparently, this understanding came in 2012, because the personnel of the Obama administration has changed both in terms of foreign policy and I domestic terms. Most likely, it will lead to very strong changes in policy. But there is a question whether they will try to reverse the negative economic trend - I think it's impossible, but they can try - or if they are already preparing for the consequences that will result in a deepening of the crisis.
Sergei Afontsev, head of the department of economics of the Institute of World Economy and International Relations of the RAS
At present the threat of the U.S. default and a severe recession in the world economy does not exist. But there is a real threat of the sharp fall in the international financial markets in the event of delay with solving the problem of debt ceiling and the U.S. budget deficit. Why is there no threat of default and no threat of a global recession? The fact is that what we are seeing now with the debates about the national debt and the budget deficit the U.S. is a classic political game between the Republican and Democratic parties, the meaning of which is to present an opponent in the most negative light and to present yourself positively.
Ilya Kiselyov, financial analyst, PhD
I believe that, of course, we are not talking about a global default, but there can be a possible technical default, even in the worst case. What does it mean? This means that it is not that the United States cannot afford to pay, but there is no political decision to raise the debt ceiling. That is, it can be done, and no default will take place. What can we say here? First of all, this is a negative policy of the U.S., which is being conducted now, infighting between the Republican and Democratic parties affected by the financial markets and America as a whole. Because it was the same situation with the debt ceiling on August 2, 2011, we remember, too, when the debt ceiling has reached the value of borrowing and just caught up with the U.S. GDP. Then the decision was made 12 hours prior to the possibility of default, that is, the decision to increase the debt ceiling. After this news the SNP has downgraded the U.S. from AAA to a lower rating. Now the same thing may happen. That is, if the U.S. administration will act in this way, then, accordingly, there will be the possibility of negative consequences for the United States, first of all, a downgrade in its ratings, it has already been said about this possibility. Therefore it is negative that they perform such a blockbuster, it resembles a Hollywood blockbuster, when the main character comes out of the shackles and destroys everyone. Something similar is happening. This cannot destabilize financial markets. Of course, everyone knows that there will not be any default. This is a political bargaining between the Republican and Democratic parties which will be reduced to the fact that the Republicans will get some additional preferences.
Evgeny Nadorshin, economist, managing director for macro analysis of AFK "Sistema"
I do not expect major problems from the current negotiations. Indeed, most of all, they will be resolved, the debt ceiling will be raised, the Democrats will somehow agree with the Republicans, and basically the U.S. federal budget deficit will shrink. These are mechanical, purely technical things. As I see it, it is already clear, as my colleagues have repeatedly mentioned, that the U.S. really cannot increase the debt so rapidly. Those volumes which now are offered to private and public investors, both residents and non-residents, are unlikely to be acceptable. Moreover, the country, in spite of low interest rates, does face difficulties already with the sale of the stock of debt, and its service, it is also an essential part of federal spending, not to mention the fact that in the United States there are its states and, in general, their debts are also pretty large. The situation is not so happy and pleasant, there are very great difficulties, including at the level of the states. So if we take into account this component, in principle, a country has been charged with the debt for a long time, so both the Republicans and the Democrats are interested in one way or another to solve this problem and reduce its relevance, because it is uncomfortable for both Republicans and Democrats at all levels.
