If you thought that Greece was a major crisis, look again. Across the ocean, in the economy once considered the engine of the world, the Republicans are playing a waiting game while the world holds its breath. United States, once sacrosanct in terms of budget, my default on its debt. There are only 4 days left until the unthinkable can happen: Congress will not approve the new budget deficit and US will enter into default.
Neither FED, not Treasury commented on what would happen if an agreement is not reached and pushed through the Congress. United States had always in the past a huge deficit (as of June it reached -9.1% of the GDP in the budget balance deficit). Yet, a compromise has always been agreed mutually and the deficit was rolled over. These days, because of a political stand still, this might not happen once more. President Barack Obama says that unless Democrats and Republicans strike a deal, the government will start running out of money to pay all its bills on August 2, a once unthinkable prospect that is increasingly unnerving investors.
The fears of such a huge default is already hitting all the markets, prompting since several weeks a flight to the haven of the safer currencies and commodities. The dollar is heavily suffering and so are the stock markets in the US and Europe.
We at doitinvest.com are very curious what would happen in the case of the default – if this happens, would it throw the world economy in a new deep recession?