The most talked about current topic is that of the US shutdown. The shutdown is bad news for exporters from around the world, as exporters fear about checks being cleared by the US. The shutdown has affected the world stock markets and world currencies. Most economists feel global investors will gradually decline and the role of the dollar as world’s leading reserve currency will be challenged due to the ongoing fiscal dysfunction along with debt crisis. Countries all over the world had expressed deep concern when the world superpower had shutdown. Eminent economists, country leaders and other experts researched and analyzed the situation. Some of the expert comments are as follows –
- UK Prime Minister David Cameron stated that “The USA shutdown should serve as a reminder on how public expenditure should be prudently controlled; otherwise, a deficit is inevitable.”
- China stated that “The United States, the world’s sole superpower, has engaged in irresponsible spending for years.” China’s Deputy Finance Minister, Zhu Guangyao, urged US leaders to learn from the past, noting the last time the dispute neared the brink in 2011, the credit rating agency Standard and Poor’s downgraded the US credit rating. After the shutdown ended, China said “The current US crisis is a good time for the befuddled world to start considering building a de-Americanized world.”
- Japan Finance Minister Taro Aso said “I think this could likely result in a situation where the dollar will be sold and the yen will be bought.”
- According to British economist and former UK treasury official, Neil Mackinnon, “Even if the US government manages to raise the debt ceiling by the October 17 deadline, the crisis has already resulted in the country’s reputation being severely tarnished.” In his words, “The global economy is witnessing a major shift with emerging markets gradually growing in importance and outweighing western models.” He strongly feels that the dollar will soon lose value as the global reserve currency, and the world will adopt a multipolar currency system.
- US treasury secretary Jack Lew said, “I’m telling you that on the 17th, we run out of the ability to borrow, and Congress is playing with fire.”
- Republican house speaker John Boehner told, “You’ve never seen a more dedicated group of people who are thoroughly concerned about the future of our country. The nation’s credit is at risk because of the administration’s refusal to sit down and have a conversation. So the deadlock continues, with investors pondering whether this impasse really could turn into a catastrophic debt default.” He also said he won’t pass a bill to increase the US debt ceiling without addressing longer-term spending and budget challenges.
- “We now have an opportunity to focus on a sensible budget that is responsible, that is fair, that helps hardworking people all across this country,” President Barack Obama said (after the vote to pass the debt deal).
End of Shutdown on 16th October, 2013
The shutdown of 16 days ended on 16th October, 2013, with the passing of the debt deal by the Congressional Republicans. The Congressional Republicans accepted defeat in the political war with President Barack Obama. This decision came a day before the deadline after the Treasury Department warned that US has run out of money to pay the debt obligations, and that the nation’s credit rating is being terribly threatened. The debt deal would fund the government up to 15th January, 2014; and raise the debt limit up to 7th February, 2014. Under the re-opening agreement, the two chambers of Congress would now hold negotiations to come up with a long-term blueprint for tax and spending policies over the next decade by 13th December, 2013. The income verification rules for Americans adopting the new health insurance created by the Affordable Care Act have been tightened now.
Obama had refused to compromise, leaving the Republicans with no choice. While some Republicans felt that the Congress should have passed a bill to fund the government without policy strings attached weeks ago, others feel that they should have held their positions more strongly and should not have agreed to pass the debt deal.