News / Economy

US Debt Crisis Likely to Hurt World's Lenders, Borrowers, Investors

US Debt Crisis Likely to Hurt World's Lenders, Borrowers, Investorsi
X
October 05, 2013 12:19 AM
While official Washington remains preoccupied with a government shutdown, many experts are more concerned about another looming crisis. The U.S. Treasury Department says the government will run out of money to pay its bills by October 17 unless President Barack Obama and Congress agree to allow the government borrow more money. As VOA’s Kent Klein reports, the impact would be felt by borrowers, lenders and investors around the world.

US Debt Crisis Likely to Hurt World's Lenders, Borrowers, Investors

Kent Klein
While official Washington remains preoccupied with a government shutdown, many experts are more concerned about another looming crisis. The U.S. Treasury Department says the government will run out of money to pay its bills by October 17 unless President Barack Obama and Congress agree to allow the government borrow more money. The impact  would be felt by borrowers, lenders and investors around the world.

Five years ago, at the start of the Great Recession, investors raced to sell off their stocks, causing share prices to dive.

Today, retirees and investors like Paxton Baker are hoping to avoid another hit if the government defaults on its obligations. “I mean, I am a federal retiree. I depend on the government for my monthly annuity, and if they do not do that, I am probably not going to get paid next month,” he said.

Baker belongs to an investment club. He and his colleagues plan to withstand uncertainty by investing in stocks for the long term.

“Certainly, there would be an impact on investments, but I think we feel overall that stocks will continue to be a good place to put your money,” said Baker.

Sheila Cheek is an advisor with Edward Jones Investments. She is telling her clients to look at the long term.

“It may take time or it could be a quick recourse. But once again, keeping the long-range investment goals in mind will help you to smooth over a lot of the short-term volatilities,” she said.

A Treasury Department report says a default could freeze credit markets, devalue the dollar, send interest rates higher and possibly cause another recession.

That would drive international investors away from the U.S., according to economist Stan Collender. “All they know is, this solid rock of an economy, solid rock of a political system, seems to be shaking. And that has got to drop your confidence. It means that, if they are counting on the money to be repaid at the right time also, they may just say, ‘You know what, it is not worth the risk,’” said Collender.

To avoid a calamity, Congress needs to agree to raise the nation's debt ceiling. House Speaker John Boehner and other Republicans are demanding concessions from Democrats on spending and health care first.

"I do not believe that we should default on our debt. It is not good for our country. But after 55 years of spending more than what you bring in, something ought to be addressed," said Boehner.

Obama says he will not even discuss it. "There will be no negotiations over this. The American people are not pawns in some political game."

The damage from a default could last a long time, said Joseph Minarik at the Committee for Economic Development. "In all likelihood, that will affect the esteem with which lenders perceive the U.S. Treasury for a very long period of time. Trust, once it is lost, is very hard to regain."

Minarik and others are urging the nation's leaders to avert a crisis. "Don't do this," he said.

Meanwhile, Baker and his fellow investors are working to protect their assets in case the government fails them.

You May Like

Pundits Split Over Long-Term US Role in Afghanistan

Security pact remains condition for American presence beyond 2014; deadline criticized More

US Eyes Islamic State Threat

Officials warn that IS could pose a threat to US homeland More

Video Ukraine: Captured Troops Proof of Russian Role in Separatist Fight

Moscow says Russian troops crossed into Ukrainian territory by mistake More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Scientists Unlock Mystery of Bird Flocksi
X
George Putic
August 25, 2014 4:00 PM
How can flocks of birds, schools of fish or herds of antelope suddenly change direction -- all the individuals adjusting their movement in concert, at seemingly the same time? British researchers now have some insights into this behavior, which has puzzled scientists for a long time. VOA's George Putic has more.
Video

Video Scientists Unlock Mystery of Bird Flocks

How can flocks of birds, schools of fish or herds of antelope suddenly change direction -- all the individuals adjusting their movement in concert, at seemingly the same time? British researchers now have some insights into this behavior, which has puzzled scientists for a long time. VOA's George Putic has more.
Video

Video Ukraine: Captured Troops Proof of Russian Role in Separatist Fight

Ukrainian officials say they have captured Russian soldiers on Ukrainian territory -- the latest accusation of Moscow's involvement in the conflict in eastern Ukraine. VOA's Gabe Joselow reports from the Ukrainian side of the battle, where soldiers are convinced of Russia's role.
Video

Video Rubber May Soon Come From Dandelions

Synthetic rubber has been around for more than a century, but quality tires for cars, trucks and aircraft still need up to 40 percent or more natural rubber content. As the source of natural rubber, the rubber tree, is prone to disease and can be affected by bad weather. So scientists are looking for replacements. And as VOA’s George Putic reports, they may have found one in a ubiquitous weed.
Video

Video Jewish Life in Argentina Reflected in Yiddish Tango

Jewish people from across Europe and Russia have been immigrating to Argentina for hundreds of years. They brought with them dance music that were eventually mixed with Argentine tango. The result is Yiddish tango -- a fusion of melodies and cultural experiences that is still evolving today. Elizabeth Lee reports from the Skirball Cultural Center in Los Angeles, where one band is bringing Yiddish tango to an American audience.
Video

Video Peace Returns to Ferguson as Community Tries to Heal

Thousands of people nationwide are expected to attend funeral services Monday in the U.S. Midwestern city of St. Louis, Missouri, for Michael Brown, the unarmed African-American teenager who was fatally shot by a white police officer August 9 in the St. Louis suburb of Ferguson. The shooting touched off days of violent demonstrations there, resulting in more than 100 arrests. VOA's Chris Simkins reports from Ferguson where the community is trying to move on after weeks of racial tension.
Video

Video Meeting in Minsk May Hinge on Putin Story

The presidents of Russia and Ukraine are expected to meet face-to-face Tuesday in Minsk, along with European leaders, for talks on the situation in Ukraine. Political analysts say the much welcomed dialogue could help bring an end to months of deadly clashes between pro-Russia separatists and Ukrainian forces in the country's southeast. But much depends on the actions of one man, Russian President Vladimir Putin. VOA's Daniel Schearf reports from Moscow.
Video

Video Artists Shun Russia's Profanity Law

Russia in July enacted a law threatening fines for publicly displayed profanity in media, films, literature, music and theater. The restriction, the toughest since the Soviet era, aims to protect the Russian language and culture and has been welcomed by those who say cursing is getting out of control. But many artists reject the move as a patronizing and ineffective act of censorship in line with a string of conservative morality laws. VOA's Daniel Schearf reports from Moscow.
Video

Video British Fighters on Frontline of ISIS Information War

Security services are racing to identify the Islamic State militant who beheaded U.S. journalist James Foley in Syria. The murderer spoke English on camera with a British accent. It’s estimated that several hundred British citizens are fighting for the Islamic State, also called ISIL or ISIS, alongside thousands of other foreign jihadists. Henry Ridgwell reports for VOA from the center of the investigation in London.

AppleAndroid

World Currencies

EUR
USD
0.7537
JPY
USD
103.79
GBP
USD
0.6032
CAD
USD
1.0957
INR
USD
60.522

Rates may not be current.