The document discusses whether the US should raise its debt ceiling. It provides background on the current US debt level of $14.29 trillion, which is 96% of GDP. It then explains why the US has historically been able to accumulate so much debt due to the dollar being the global reserve currency. Finally, it outlines the issues that could arise both if the US does raise its debt ceiling, such as inflation, and if it does not, such as defaulting on payments and a stock market decline.
3. THE FLOW
• The Current Scenario
• How did they reach here
• Why do you need debt ceiling?
• The Criticality of the situation
• Issues if they raise and if they don’t raise
the ceiling
• Open Forum
5. Have High Debt and High Rating
Why US has been able to raise so much money
6. THE DOLLAR
• Largest industrial base and surplus of dollar
backed by Gold post 2nd world war.
•1971: The Dollar was fixed as Reserve Currency.
• 1973 oil crisis: Increase in US treasury bills
held by central governments
•As a result demand for Dollar increased in the
world arena.
9. DEBT CEILING
• Limits the amount of public debt that
can be outstanding.
• Prevents the U.S. Treasury from
issuing new debt once the limit has
been reached.
11. IMPORTANCE OF DEBIT CEILING
• Provides Congress with the strings to
control the federal purse
• A form of fiscal accountability
• Compels Congress and the President to
check their debt borrowings
35. Imports
• Imports become dearer.
• End up paying more money for same quantity
of goods purchased.
• Pace of economic growth rate slows down.
36. Exports
• Exports become cheaper.
• Importer country ends up buying same
amount of goods for a lesser price.
• As a result of increase in exports, the trade
deficit might decrease.
38. INTEREST RATES
• As a result of increase in inflation, the interest
rates will go up.
• Investor confidence will go down.
• As a result the investment in the economy will
go down.
39.
40. CAPITAL FLIGHT
• Flow of funds or investments from develop to
developing countries.
• Increases unemployment in the country.
41. CAPITAL FORMATION
• Investments and capital formation are
positively correlated.
• As investments go down rate of capital
formation goes down.
• Hence government needs money to initiate
investments and growth in the economy.