Christian Debt Recovery

Debt Ceiling Debate In Congress

May 18th, 2010 |

Author: Gavin

US Market Drama Provoke Stock Rates Panic

On Tuesday, August 2nd, Congress voted to move up the debt ceiling, partially to avoid a default on some commitments. After weeks of political gridlock, here was various speculation that the debt ceiling might not be raised by any means. (The general debt of the U.S. is currently hovering right around the 15 trillion dollar mark.)

The closing bell brought an end to a dramatic week in the markets. Thursday was the worst day for stocks since the beginning of the economic crisis. The Dow Jones Industrial Average took a 512-point drop, and concerns about the European debt crisis triggered a large-scale sell-off. This news arrived as a shock to many analysts who expected the economy to continue recovering. As Friday dawned, the sell-off spread to markets worldwide.

However, there are already signs of recovery. Blue chip stocks, although still finishing low, experienced an upswing on Friday appreciation to news that the national unemployment rate fell 0.1% to 9.1%. Corporations such as Costco have remained strong, rising 0.30%.

Friday morning introduced S&P’s publication that it had lowered its rating of long-term U.S. debt from AAA to AA+, and indicated that the rating was unlikely to improve. S&P left its A-1+ rating on America’s short-term debt unchanged. Because the short-term rating has been affirmed at A-1+, money market funds which own U.S. Treasury Bills should escape relatively unscathed.

S&P stated in their report that, “We reduced our long-term rating on the U.S. because we suppose that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process. We as well think that the fiscal consolidation plan that Congress and the Administration established to this week falls short of the quantity that we think is vital to stabilize the general government debt burden by the middle of the decade.”

The U.S. Treasury disputed S&P’s decision, citing the discovery of a $2 trillion USD discrepancy in S&P’s calculations. But, while acknowledging the mistake, Standard and Poor’s stood by their conclusion to downgrade. Fitch Ratings stood by the White House and affirmed their AAA ratings on U.S. debt. True to the fickle state their name implies, Moody’s also backed the White House by affirming their AAA rating, but added that they may make a decision to reduce the rating in the near future.

The uncertainty in the market caused gold to climb even higher, to $1,663.40 for every ounce. Oil prices fell, with U.S. crude down to $83 a barrel, but the countrywide average cost of gas remains high at $3.67 a gallon.

Maybe not surprisingly, chocolate profits are booming. In 2008, the first year of the recession, chocolate sales improved by 2% above the previous year and have been rizing ever since. New chocolate markets are emerging in Asia and Eastern Europe, but the North American and European markets are going up as well.

Chocolate has turn into a recession remedy – an affordable luxury plus a “comfort food” in unsure period. Even as demand for chocolate increases, candy bar dimensions are shrinking and retail costs are rising; chocolate makers are making the most of the depression mindset. Yet, even cocoa values fell as well as the market on Thursday, on expectations of a significant cocoa harvest this year.

Nikkei closed at 9,299.88, losing 3.72%, and the Shanghai SE Composite Index dropped 2.15% to close at 2,626.42. The UK’s FTSE 100 fell 2.71%, slightly less than the DAX but more than France’s fall of 1.26%.

The Dow Jones Industrial Average closed up 60.93 points, nearly 0.5%, to 11,444.61. The S&P 500 Index closed at 1,199.38. The Nasdaq Composite Index lost 23.98 points, or barely beneath 1%, to end at 2,532.41, yet experiencing its worst week from the activation of the recession. There may be nothing to fear but fear itself. But you might want to keep a chocolate bar helpful.

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Debt Ceiling: Analysis of Actions Taken during the 2003 Debt Issuance Suspension Period

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Historically, the Congress and the President have enacted laws to establish a limit on the amount of public debt that can be outstanding (debt ceiling).On various occasions over the years, normal government financing has been disrupted because the Department of the Treasury (Treasury) had borrowed up to, or near, the debt ceiling and legislation to increase the debt ceiling had not been enacted. O…