Debt Ceiling Talks: Anger At U.S., Shades Of Panic As Deal Remains Elusive

Boehner Obama

The Huffington Post Canada   First Posted: 07/25/11 12:46 PM ET Updated: 09/24/11 06:12 AM ET

As the deadline for Washington to raise its debt ceiling grows closer and negotiations remain as far apart as they have ever been, a slowly growing tide of anger aimed at the U.S. is surfacing among the world's investors, pundits and politicians.

The possibility that the Aug. 2 deadline to raise the debt ceiling will pass without an agreement has begun taking a visible toll on the markets. All-out panic hasn't set in, but Asian and European markets sank on Monday, following a weekend during which talks between President Obama and House Majority Leader John Boehner collapsed after less than an hour.

Gold -- a commodity to which investors flock in times of uncertainty -- rose to a new record Monday, trading as high as $1,624.30 on fears that a failure to raise the debt ceiling could destabilize the global economy.

Investors who hold assets in US dollars are growing worried their investments may be worth far less if the US dollar collapses following the debt ceiling deadline, just as owners of US debt fear bond yields will spike following the deadline.

A sense of gloom and even a hint of panic was evident throughout the weekend, as the prognoses of politicians and economic analysts grew more dire -- and more hostile towards the U.S. government.

The most notable salvo came this weekend from Vince Cable, the Liberal Democrat business secretary in British Prime Minister David Cameron's coalition government.

"The irony of the situation at the moment is that the biggest threat to the world financial system comes from a few right-wing nutters in the American Congress rather than the Eurozone," Cable told BBC News.

Market analysts, who have overall discounted the possibility that the U.S. could stop paying at least some of its bills on Aug. 2., appear to be taking the possibility more seriously following this weekend's negotiation breakdown.

"Up until now the markets have given U.S. politicians the benefit of the doubt with respect to passing a package, taking the view that despite all the posturing neither side would be stupid enough to risk a run on U.S. Treasuries, as well as the likelihood of a damaging default," said CMC Markets analyst Michael Hewson. "Treasuries have so far been largely immune from the turbulence in financial markets as a result of the turmoil in Europe. As the Aug. 2 deadline looms ever closer without any agreement, this could well change and push yields higher."

Financial Times star columnist Clive Crook, generally considered a booster of the American economy, wrote Monday that he is "having second thoughts" about the U.S.'s ability to pull itself out of a political "paralysis."

"On one side you have the unrivalled energy and ambition of the American worker," Crook wrote. "On the other you have the unrivalled complacency, self-righteousness and bloody-mindedness of Washington. I never thought I would say this, but I am starting to wonder which will prevail."

But some market analysts argued there is no need for the world's investors to panic. Even if legislators fail to raise the debt ceiling, it may not prove to be the disaster that many are coming to expect. Investors will continue piling into the US dollar and US debt, the argument goes, because in today's economic environment, there simply aren't any alternatives.

"[The US] may have a technical default but I don't think that will mean that people will stop buying treasuries or stop buying dollars because you don't have alternative investment tools," Yuuki Sakurai, CEO of Fukoku Capital Management, told the Financial Post.

"Investors would surely demand more compensation to lend to the government, but Treasuries could benefit, ironically, from safe-haven demand given the lack of deep, liquid alternatives and from the likely negative impact on the still-fragile U.S. economy," CMC Markets's Hewson said.

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As the deadline for Washington to raise its debt ceiling grows closer and negotiations remain as far apart as they have ever been, a slowly growing tide of anger aimed at the U.S. is surfacing among t...
As the deadline for Washington to raise its debt ceiling grows closer and negotiations remain as far apart as they have ever been, a slowly growing tide of anger aimed at the U.S. is surfacing among t...
 
 
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awesmpwrca
That which is like unto itself is drawn...
12:45 PM on 07/27/2011
We the people of ALL parties...it's time to begin the voter recall process of these failed elected officials. Why wait until 2012...??? The US economy WANTS to grow, simply due to the fact that the majority of Americans desire to work and create value ...it seems every time we begin to take a few steps forward, it's Washington that pushes the economy backwards...not the lack of willingness to work in this country. These ideology games have now taken a realistic downward hit to the US economy. It has become apparently clear they do not want to move the country forward, they only want to vote on illusionary ideology and making certain the 'other' party takes a hit. And as long as they continue to play their games of russian roulette, the American people will continue to get tossed under the Washington bus. In the end, it's up to us, not the suits in Washington, as to which direction the country will find prosperity.
06:57 AM on 07/26/2011
These guys can't get their act together. Luckily they're mostly millionaires so they have nothing to worry about if the government fails.

This is just a game to these people.

@planbeconomics
11:39 PM on 07/25/2011
Debt Ceiling didn't started by current administration, it started over 200 years ago and idiots ignored for so long
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HUFFPOST SUPER USER
angeleyes2
bad to the bone
06:11 PM on 07/25/2011
This is so going to back fire on the dems.
04:53 PM on 07/25/2011
The extreme right in Repug garb wants to seize this moment to tear apart the USA, what Bin Laden and McVeigh

haven't achieved. Congratulations for daftness!
04:35 PM on 07/25/2011
I must admit this current version of Tea Baggers have nerve. The original version actually risked their lives to stand up to the Brits when they asked for more.

This version is willing to drag the US into the abyss of financial turmoil in order to protect the Fat Cat Job Creators (who in fact have not created one job in total over the past thirty years) and sock it to the old, sick, the poor and those who serve their country as public servants. Shame, shame.
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HUFFPOST SUPER USER
haselcheck
Had enuff...Get active....
03:02 PM on 07/25/2011
Starve the beast...It's only creative destruction...
This user has chosen to opt out of the Badges program
04:38 PM on 07/25/2011
You do appreciate these stubborn facts:

1. We live in a democratic society, and that society voted in the present government.
2. That "beast" provides the safety net that protects our weak and unfortunate, including the injured and brave members of our armed forces.
3. The nation's founding documents refer to "We, the People", not "I".

A solipsistic existence is fun to daydream about. Children make decisions based on their solipsistic values. Adults function at a higher level, understanding the need to cooperate and compromise beginning with your family right on up to the "beast".
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Arctic AARDVARK
The answer my friend is blowing in the wind.
02:48 PM on 07/25/2011
There is a giant problem with American politics, or even world politics. What we are witnessing here is greed at its ugliest. No one cares whatsoever about the people who think they are there to govern them. People are sheep, nothing more. Every powerful person the world is a disgrace (maybe minus a few) Rupert Murdoch, The Pope, Strauss Kahn, Berlusconi, Politicians. Everyone. All they care about is satisfying themselves,, usually involving sick sexually fantasies. PEOPLE ARE SICK, THEY DONT CARE ABOUT YOU, WAKE UP WORLD!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! but it is easy being a sheep,, Baaaaa!
02:22 PM on 07/25/2011
Hmm, I'm a little confused. I though that Republicans said taxes couldn't be raised because this would generate market "uncertainty".

I wonder what they call what they are doing now? My guess is "Market multi-directional dynamics enhancement"
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HUFFPOST SUPER USER
karen lyons kalmenson
i poem/paint, sometimes, i ain't
01:55 PM on 07/25/2011
Yo world...what have you done for me lately..woooo woooo wooooo
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HUFFPOST SUPER USER
bcbailey64
02:50 PM on 07/25/2011
The World funds US debt for starters...If they start pulling their money (which they are already starting to do...notice the record price of gold today?!), the US will regret its dysfunctional political system...
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HUFFPOST SUPER USER
Transitteer
and another thing . . .
01:51 PM on 07/25/2011
Republicans seem to be the most out-of-touch, clueless and reckless bunch of misfits ever to haunt politics. Their hate is stronger than common sense. Their abilities to hate are bounless, while their abilities toward statesmanship are non existent. Republicans cut the National Income while escalating spending into the stratosphere. Now they refuse to show fiscal prudence to keep the ship afloat while repairs are made. This is stupidity. This is ideology and hate, over reality and prudence. No wonder Bachmann is a Republican. You have to be a complete Moron to qualify for membership. Watch them destroy the Nation from their ignorance.
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Arctic AARDVARK
The answer my friend is blowing in the wind.
02:36 PM on 07/25/2011
True,, but do you think Harper is much better?? We are ignoring humans rights issues so we can sell our oil to China. Im assuming you're a Canuck,
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04:50 PM on 07/25/2011
Harper is a Tory not a tea bagger. Whom Canada sells their oil to remains mostly in the hands of US oil companies. As they export more than two-thirds of Canadian produced oil to the US, I do not see Harper putting a hold on oil sales until Wisconsin restores union right or Texas starts teaching evolution in schools, either.
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HUFFPOST SUPER USER
Transitteer
and another thing . . .
06:37 PM on 07/26/2011
Nope, I don't think Harper is much better, being it hard to imagine the Republicans in the south worse than they currently are. That's the problem when you allow wing-nuts to take over. And yes, I am. A proud, flag waving one too eh ;-)
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SeanMartin
Everything in moderation.
01:42 PM on 07/25/2011
This is what we get for sending amateurs to congress. And no, the one in the WH aint much better. These people need to be thrown out and forced to live in low-income public housing for a year, just so they can see the effect they have on everyone.
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04:53 PM on 07/25/2011
Oh! And your the expert, right? I don't think so! We be in a much bigger mess if we sent people like you to Washington!
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SeanMartin
Everything in moderation.
05:16 PM on 07/25/2011
Child, remember: spelling, grammar, and punctuation can *all* be your very bestest friends...
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bcbailey64
01:34 PM on 07/25/2011
A bunch of US right-wing nutters are holding the world financial system hostage.
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01:39 PM on 07/25/2011
Ignorance is bliss...
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Mastiff
Via ovicipitum dura est.
01:33 PM on 07/25/2011
In protecting the American rich from paying more, the Republicans will drag the whole world down. Do they realize that instead of losing money to taxes, the rich they are trying to protect will now lose value in everything they own as will every other American?

Stay classy guys. Maybe you should have skipped the fight to allow more expensive lightbulbs and spent the time on the budget; at this rate, there won't be any left who can afford them.
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01:25 PM on 07/25/2011
Anyone paying attentions? http://cpc.grijalva.house.gov/index.cfm?sectionid=70

Of course not.