u.s debt ceiling crisis
With Congress moving like molasses and time running out, more and more Americans are wondering what happens when we hit the debt ceiling.
The short answer is that it would be bad - as in catastrophically, you've-never-seen-anything-like-this-in-your-life bad.
"[It] would be like the financial market equivalent of that Hieronymus Bosch painting of hell," Michael Feroli, chief economist at JP Morgan, told the Washington Post.Brace yourself, because this is what a default would look like...
Debt Ceiling Bill Nothing More Than a Band-Aid
We have a short-term debt ceiling fix - with emphasis on short term.
U.S. President Barack Obama Monday night signed into law a bill suspending the debt ceiling, a move that allows the government to avoid default-at least until August when Congress will again have to act to prevent such a scenario.
The new law lifts the current debt limit through May 18, allowing the federal government to continuing borrowing to pay its bills until then.
But Congress does have more leeway than the May 18 deadline. The Treasury can use "extraordinary measures" to access funds, which will give it until August before the risk of default comes up again.
Are Steep U.S. Spending Cuts Inevitable?
U.S. Rep. Paul Ryan (R-WI), the chairman of the House Budget Committee, is adamant Republicans will resist any further tax increases - a staunch GOP stance that makes steep spending cuts almost certain.
Ryan, the 2012 vice president nominee, told NBC's "Meet the Press" Sunday that the $1.2 trillion worth of automatic spending cuts will take effect because "Democrats have opposed our efforts to replace those cuts with others."In the NBC interview, Ryan took aim at President Barack Obama.
"I don't think that the president actually thinks we have a fiscal crisis," Ryan said. "He's been reportedly saying to our leaders that we don't have a spending problem, we have a healthcare problem. That leads me to conclude that he just thinks we ought to have more government-run healthcare and rationing."
Will the Debt Ceiling be Good for Gold and Silver?
Investors preparing for Washington's budget battle need to know: Will the debt ceiling be good for gold and silver?
Thanks to recent legislation passed in the U.S. House of Representatives Wednesday, the debt ceiling could be extended until May 19. The bill now moves onto the Senate where it is expected to get the green light, then should be signed quickly by U.S. President Barack Obama.
That gives investors time to prepare for what any budget decision - or indecision - out of Washington will do for their investments.
While the bill leaves the government without a long-term budget strategy, investors ought to have a plan in place.
One thing they can plan on is higher silver and gold, and here's why.
Debt Ceiling Bill Includes Controversial "No Pay" Plan
Republicans will vote tomorrow (Wednesday) on a debt ceiling bill that will give Congress nearly four months to make some major budget decisions - or risk losing out on pay.
The bill aims "to ensure complete and timely payment of the obligations of the United States Government until May 19, 2013," according to a release Monday from the House Rules Committee. Exactly how much the $16.4 trillion debt ceiling will be lifted hasn't been discussed.
In a significant shift in GOP strategy, the legislation does not include specific spending cuts, like previously when Republicans have requested dollar-for-dollar cuts to match the debt ceiling increase.
What it could include is a requirement for both the House and Senate to pass a budget by as early as April 15 or have Congress members' salaries held in escrow until one is passed - what the GOP has coined a "no budget, no pay" rule.
"[I]f the Senate of House fails to pass a budget in that time, members of Congress will not be paid by the American people for failing to do their job. No budget, no pay," House Majority Leader Eric Cantor, R-VA, said last week.