US DEBT ISSUE

US Debt IssueUS has been living

beyond its means.The federal govt. has

spent more money than it has taken in during the most of the past for decades

Putting its credit rating at risk

National debate on the role of obama’s calculation and its purpose

US Debit IssueHistory of USCurrent status of USCauses of the US debit issueImpact of the debit issueFuture stratergies

History USA has been a strong

economy. Dollar was the most sought

after currency in the world. The long term credit rating of

USA was AAA.

What is the debt ceiling?

When there is a budget deficit , the only way that the shortfall can be paid off is by issuing of debt instruments. Under the federal law of US, the amount that the govt. can borrow is limited by the debt ceiling, which can only be increased with a vote by congress.

History…Congress instituted the concept of “debt ceiling”in 1917in order to provide more flexibility to finance the US involvement in World War I, Since then, the Treasury may borrow any amount needed as long as it keeps the total at or below the authorized ceiling. The congress must enact specific legislation and the President must sign it into law. The US has had public debt since its inception. Debts incurred during the American Revolutionary War. Every president since Harry Truman has added to the national debt.The debt ceiling has been raised 74 times since March 1962

Debt CrisisThe Current Scenario According to Treasury, the US government would

run out of cash to pay all its bills on August 2011, which became the deadline to increase the debt ceiling. 

As per Wall Street analysts, the US Treasury would not be able borrow from the capital markets after August 2, but still would have enough incoming cash to meet its obligations until August 15.

Analysts also predicted that Treasury would be able to roll over the $90 billion in US debt that matured on August 4, and gain additional time to avert the crisis

Current Scenario…The immediate crisis ended on July 31, 2011,

when a complex deal was reached that raised the debt ceiling and reduced future government spending. However, similar debates are anticipated for the 2012 and 2013 budget.

After the legislation was passed by both the House and Senate, President Barack Obama signed the Budget Control Act of 2011 into law on August 2, the day of the deadline .

Reasons of Debt Crisis

Reasons… Budget deficit- The federal government budget deficit or surplus

is the cash difference between government revenue and spending(Expenditure) ignoring intra-governmental transfers.

Political climate -The disagreement between the Republicans and the Democrates.

Standard and Poor's downgraded the USA sovereign credit rating by one notch from AAA to AA+ i.e a negative .

SOVEREIGN BONDS-Bonds issued by national governments in foreign currencies.

The Federal Government wants the borrowing limit to increase to back the liability or all its Obligations but the Republicans first wants the Spending Cuts.

The US national public debt (Public borrowing) which is $14.34 Trillion.

Impact Of Debt CrisisWorld• Adversely affecting the countries relying on

exports to US• Increase in Gold price• Fluctuations in stock Market

India• Increase in Unemployment• Loss by exporters-software• Fluctuations in stock market

Future strategiesExpenses cutting

downNo tax increaseDecrease in military

expensesReconstructing the

economyIncrease in

employmentCutting down the

inflation

Thank You!Joseph Mathew -

P11127Nikita A Thomas -

P11140Abhilash K - P11103Pooja Tiwari – P11143Ria K Joseph – P11147Anoop MR – P10118