News / Economy

Global Fears Grow Over US Shutdown

Global Fears Grow Over US Shutdowni
X
October 04, 2013
There are new worries about the consequences of the U.S. government shutdown. The Treasury Department says failure to reach a deal on the country’s financial obligations, including the debt ceiling, could plunge the U.S. economy into a recession. On Thursday, the International Monetary Fund said that, without a deal soon, the ongoing fiscal problems of the United States could drag the rest of the world with it. Mil Arcega has more.
TEXT SIZE - +
There are new worries about the consequences of the U.S. government shutdown.  The Treasury Department says failure to reach a deal on the country’s financial obligations, including the debt ceiling, could plunge the U.S. economy into a recession.  On Thursday, the International Monetary Fund said that, without a deal soon, the ongoing fiscal problems of the United States could drag the rest of the world with it.

The economic cost of the country’s first government shutdown in 17 years is staggering. One estimate pegs the daily losses to businesses, tourism and lost wages at $300 million a day - or $1.6 billion each week..

And that’s just the shutdown.  The bigger worry is a possible impasse over the government's debt ceiling.  

IMF Managing Director Christine Lagarde:

“The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse and could very seriously damage not only the U.S. economy but also the entire global economy," she said.

If lawmakers don’t reach a deal to raise the country’s $16.7 trillion debt limit, the Treasury Department says the U.S. will run out of money to pay its obligations by October 17.  

If that happens, investors would lose faith in the U.S. economy, the value of the dollar would plunge, interest rates would soar and unemployment would rise.

That's the worst case scenario - but one that grows more probable each day the shutdown continues.  

Tony Crescenzi is an investment manager at Pimco.

“It is a serious matter, defaulting.  And markets, while they assign a very low probability and so would we, are starting to worry a little bit because of the lack of getting together, the acrimony that exists in Washington," said Crescenzi.

On Wall Street, the stock sell-off intensified Thursday, after Republicans and Democrats emerged from a White House meeting no closer to an agreement than when they started.

Adding to the frustration,  the Labor Department says monthly job numbers,  an important indicator of U.S. economic health, will not be released as planned on Friday.
 
Without that data, Stan Collender, the head of the financial communications firm Qorvis, says the Federal Reserve is now more likely to delay plans to scale back its monetary stimulus.

“The lack of a jobs report probably freezes the Fed in place, unless they’ve got their own information and they may very well have what would indicate what the jobs report might have been," said Collender.

Given the likely financial impact of the shutdown, Collender says keeping the stimulus in place is a good thing.  But the daily uncertainty carries a heavy price for U.S. businesses. Retailers are worried that a prolonged shutdown could make consumers anxious.  Consumer spending accounts for about 70 percent of the country’s economic output.

You May Like

Wikipedia Proves Useful for Tracking Flu

Technique gave better results than Center for Disease Control (CDC) and Google’s Flu Trends More

Turkish Law Gives Spy Agency Controversial Powers

Parliament approves legislation to bolster powers of intelligence service, which government claims is necessary to modernize and deal with new threats Turkey faces More

Video Face of American Farmer Changing

Average American farmer is now 58 years old, and farmers 65 and older are the fastest growing segment of the population More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Face of American Farmer is Changingi
X
Mike Osborne
April 18, 2014
The average American farmer is now 58 years old, and farmers 65 and older are the fastest growing segment of the population. It’s a troubling trend signaling big changes ahead for American agriculture as aging farmers retire. Reporter Mike Osborne says a new report from the U.S. Census Bureau is suggesting what some of those changes might look like... and why they might not be so troubling.
Video

Video Face of American Farmer is Changing

The average American farmer is now 58 years old, and farmers 65 and older are the fastest growing segment of the population. It’s a troubling trend signaling big changes ahead for American agriculture as aging farmers retire. Reporter Mike Osborne says a new report from the U.S. Census Bureau is suggesting what some of those changes might look like... and why they might not be so troubling.
Video

Video Donetsk Governor: Ukraine Military Assault 'Delicate But Necessary'

Around a dozen state buildings in eastern Ukraine remain in the hands of pro-Russian protesters who are demanding a referendum on self-rule. The governor of the whole Donetsk region is among those forced out by the protesters. He spoke to VOA's Henry Ridgwell from his temporary new office in Donetsk city.
Video

Video Drones May Soon Send Data From High Seas

Drones are usually associated with unmanned flying vehicles, but autonomous watercraft are also becoming useful tools for jobs ranging from scientific exploration to law enforcement to searching for a missing airliner in the Indian Ocean. VOA’s George Putic reports on sea-faring drones.
Video

Video New Earth-Size Planet Found

Not too big, not too small. Not too hot, not too cold. A newly discovered planet looks just right for life as we know it, according to an international group of astronomers. VOA’s Steve Baragona has more.
Video

Video Copts in Diaspora Worry About Future in Egypt

Around 10 percent of Egypt’s population belong to the Coptic faith, making them the largest Christian minority in the Middle East. But they have become targets of violence since the revolution three years ago. With elections scheduled for May and the struggle between the Egyptian military and Islamists continuing, many Copts abroad are deeply worried about the future of their ancient church. VOA religion correspondent Jerome Socolovsky visited a Coptic church outside Washington DC.
Video

Video Critics Say Venezuelan Protests Test Limits of Military's Support

During the two months of deadly anti-government protests that have rocked the oil-rich nation of Venezuela, President Nicolas Maduro has accused the opposition of trying to initiate a coup. Though a small number of military officers have been arrested for allegedly plotting against the government, VOA’s Brian Padden reports the leadership of the armed forces continues to support the president, at least for now.
Video

Video More Millenials Unplug to Embrace Board Games

A big new trend in the U.S. toy industry has more consumers switching off their high-tech gadgets to play with classic toys, like board games. This is especially true among the so-called millenial generation - those born in the 1980's and 90's. Elizabeth Lee has more from an unusual café in Los Angeles, where the new trend is popular and business is booming.
Video

Video Google Buys Drone Company

In its latest purchase of high-tech companies, Google has acquired a manufacturer of solar-powered drones that can stay in the air almost indefinitely, relaying broadband Internet connection to remote areas. It is seen as yet another step in the U.S. based Web giant’s bid to bring Internet to the whole world. VOA’s George Putic reports.
AppleAndroid

World Currencies

EUR
USD
0.7217
JPY
USD
102.17
GBP
USD
0.5949
CAD
USD
1.1009
INR
USD
60.326

Rates may not be current.