Debt impasse has US poised for meltdown

The deadline for raising the US debt ceiling may be Tuesday – when the US Treasury will supposedly have more bills to pay than cash in its coffers – but pressure was on last night to get at least the outlines of a deal done before world markets begin opening for the week later today, starting with Asia.

Most market analysts in the US continue to believe the bickering politicians on Capitol Hill will come to their senses. "It seems unlikely that Congress would choose financial Armageddon over some type of compromise," said Joseph Tanious of JP Morgan Asset Management. But there are real fears that further stumbling could cast a deep chill on global markets. That both sides might have a final package in place by tonight that will raise the debt ceiling and cut spending is unlikely. But markets would be calmed if sufficient progress is made.

Signs of trouble multiplied on Friday, notably with a sell-off of short-term US Treasuries. Thomas Tzitzouris, the head of fixed income research at Strategas Research Partners, said: "It's not panic, but we are pre-positioning in case something goes wrong over the weekend."

The Dow Jones swooned further, slipping 0.8 per cent, ending its worst week in a year. Also at risk is Washington's sterling credit rating. Moody's, one of the main rating agencies, said it still expected the US to retain its Triple A status, provided Congress and the White House do a deal.

Citizens had a glimpse of Uncle Sam's predicament late last week when officials noted that the US had $73.8bn in cash to hand, which compares with Apple's reported $75.9bn.

Behind closed doors, the Treasury is planning what happens if the political mess doesn't clear and default arrives. That means deciding what gets paid. One group who will receive special priority are the holders of US debt. The government wants to be sure it can cover $29bn in interest to bondholders due on 15 August.

Some public-sector workers were told to show up for work even if a default means their pay cheques may be halted. Other obligations that the government might not be able to meet could include payments to companies supplying government as well as to veterans and those on benefits.

All would be part of the nightmare scenario that President Barack Obama and others, including the Treasury Secretary, Tim Geithner, have been warning of for months.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee