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Strategies & Market Trends : Buy and Sell Signals, and Other Market Perspectives

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Jan 16 4:00 PM EST

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To: robert b furman who wrote (43911)	1/16/2013 10:45:12 AM
From: expiredoptions	Read Replies (1) of 221927

RE: The United States debt-ceiling crisis was a political debate in the United States Congress about increasing the debt ceiling that resulted in a financial crisis. The crisis ended when a complex deal was reached that raised the debt ceiling and reduced proposed increases to future government spending, although similar debates are possible for future budgets. [1] As part of the aftermath, the crisis had a major political impact in the United States, in which public support for Congress fell dramatically. President Barack Obama and Speaker of the House John Boehner announced on July 31 that an agreement had been achieved. After the legislation was passed by both the House and Senate, President Obama signed the Budget Control Act of 2011 into law on August 2, the date estimated by the department of the Treasury that the borrowing authority of the US would be exhausted. [2] Four days later, on August 5, the credit-rating agency Standard & Poor's downgraded the credit rating of US government bond for the first time in the country's history. Markets around the world as well as the three major indexes in the US then experienced their most volatile week since the 2008 financial crisis with the Dow Jones Industrial Average plunging for 635 points (or 5.6%) in one day. Yields on US Treasuries, however, dropped as investors, anxious over the dismal prospects of the US economic future and the ongoing European sovereign-debt crisis, fled into the safety of US government bonds and bonds of other safe haven economies. [3] Moody's and Fitch, however, have retained America's credit rating at AAA. The Government Accountability Office (GAO) estimated that the delay in raising the debt ceiling increased government borrowing costs by $1.3 billion in 2011 and also pointed to unestimated higher costs in later years. [4] The Bipartisan Policy Center extended the GAO's estimates and found that delays in raising the debt ceiling would raise borrowing costs by $18.9 billion. [5]

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