America is on the brink of a public debt crisis 0

America is on the brink of a public debt crisis 0

The US will reach the allowable debt limit of 14.294 trillion USD sooner than expected and the consequences will be unpredictable if Congress does not change the debt threshold, according to this country's Finance Secretary Timothy Geithner.> The US government is at risk of paralysis

US Treasury Secretary Timothy Geithner urgently requested Congress to raise the public debt safety threshold.

By March 31, US public debt was at $14.214 trillion and the ceiling of $14.294 trillion is at risk of being broken before May 16.

In a letter sent to Congress this week, Mr. Timothy Geithner urgently called for an early vote to approve raising the public debt limit, otherwise the government, people and businesses will face unpredictable consequences.

Within 7 weeks after public debt reached the weekly threshold, the US Government was at risk of defaulting on some debts;

`This may cause difficulties for households, creating concerns about national security and defense capabilities,` Mr. Timothy Geithner wrote in a letter to Congress.

He added that when public debt exceeds the limit and the National Assembly does not raise this limit, Government loans will be subject to higher interest rates, while houses will continue to depreciate and savings will continue to decline.

`Even the worst risk could be a potential financial crisis, even worse than the crisis that just took place and is in the process of recovery,` he warned.

Since 1962, the US Congress has adjusted the safety threshold for public debt 75 times.

Previously, the US Treasury predicted that the debt ceiling of 14.29 trillion USD would be broken on May 31.

Ms. Sheila Bair, President of the American Deposit Insurance Corporation (FDIC), said that the US government needs to quickly introduce debt reduction measures to prevent the next financial crisis, which is likely to break out in the US.

According to FDIC data, federal debt has doubled in the past seven years to $14 trillion, a direct result of the financial crisis and the government’s unwillingness to limit long-term structural deficits.

`Finally, the current massive borrowing behavior will eventually threaten America’s financial stability because investor confidence in the United States will decline,` Ms. Bair warned.

When more than 70% of US Treasury bonds held by outside private investors mature in the next 5 years, investors’ less confidence in the US will cause interest costs for the government and the private sector to increase.

In addition, according to the US Treasury Department’s announcement, as of January, China had net sold US government bonds for 3 consecutive months.

The total number of US government bonds that China holds in January decreased by 5.4 billion USD, to 1,155 billion USD, a continuous decrease for three consecutive months.

Foreign central banks hold $3,150 billion in US Government bonds out of a total of $4,440 billion outstanding abroad.

And yet, even the Pimco investment fund – the world’s largest investment fund in government bonds and a branch of the giant financial and insurance group Allianz – is also gradually selling US government bonds.

Furthermore, the investment fund of Jim Rogers – chairman of Rogers Holdings and Beeland Interests Inc.

For Mr. Obama’s administration, the above decisions could cause US government bonds to depreciate sharply, leading to the need to raise interest rates and thereby increase the already huge amount of budget debt.

Most recently, Republican lawmakers proposed a budget cut of 33 billion USD this year, a small number compared to the expected budget deficit of 1,400 billion USD.

According to the US Department of Finance, the US budget deficit increased by 222.5 billion USD in February. This is the month with the largest budget deficit increase ever.

If analyzed in terms of numbers, the US budget deficit in recent years has been a huge number.

The US government is facing the risk of having to shut down in the next day or two if this country’s Congress does not pass an operating budget for President Obama’s administration.

Summary by Tuyen Nguyen – Song Linh

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