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US Government Shutdown and the Debt Ceiling

Today we enter the second week of the US government shutdown as the political stalemate continues, and the debt ceiling limit approaches. It is estimated that the US will be unable to meet their bills on roughly the 17th October, at which point, if the debt ceiling has not been increased, the US would default on their debt.

The current debt ceiling is currently capped at $16.699 trillion, which the current Democrat government is attempting to raise. The Republican Party, (primarily the Tea Party movement) are attempting to block the Obamacare bill through not agreeing to an increase.

Speaker of the House of Representatives, John Boehner is adamant that there will be no deal on the budget or debt limit without spending talks with President Obama.

Each month the US spends more each month than is raised in tax receipts, the difference is then funded by debt, issued by the US Treasury Department. Government departments have had to shut down, as it will be unable to fund the associated costs unless the debt ceiling is raised.

US debt and the debt ceiling

US Government Default

If the two opposing parties are unable to agree, and the deadlock continues, the US government would be unable to meet their borrowing costs. Though this is widely covered, it is pretty unlikely that the Republican Party would allow the US to default on their debt. This would send global markets into chaos, and have serious reprocautions for the US in the future.

The US is able to service their debts the country as in reasonable economic health, though the self-imposed debt ceiling could leave the country unable to borrow more to meet their borrowing needs.

If you would like to take a view on the debt ceiling and the current US government shutdown, why not open a demo trading account with Abshire-Smith. There is the choice of 3 trading platforms, allowing you to trade with real-time market data and practice funds, so there is no risk to your capital.

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