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Greatest Crisis Ever – US Debt Default?

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. Read More »Greatest Crisis Ever – US Debt Default?

Quantitative Easing Big Scale – Definitions and US Study Case

photografy possible rising of the us economy

photography possible rising of the us economy

One of the latest causes of the Euro spiking up above 1.42 versus the USD was the quantitative easing policies applied by FED. If you are not familliar with the term, here’s the definition:
Quantitative easing represents the injection of money from a central bank into the economy, via the banking system. It works like this:
1st stage: the Central Bank tries to push the economy by lowering interest rates, which should encourage lending and therefore the consumption. In our case, FED interest rates are already at 0% and publishing negative interest rates would be a bit Japanese, meaning strange (what would it mean to put your monry on the bank and get less at the end of the deposit?!)
2nd stage: Central Bank pushes up the public expenditure, in the hope that money spent like this will push up consumption and persuade firms to invest. In US this is impossible too – because the public debt is huge.Read More »Quantitative Easing Big Scale – Definitions and US Study Case

US Mortgages to Be Further Subsidized by the Government

mortgagesThe US Treasury Department is considering giving banks and investors billions of dollars in fresh incentives to modify troubled mortgages and save homeowners from foreclosure, sources familiar with official deliberations said.

Under one scenario, investors in second liens would receive a cash payment if they agree to ease the terms of troubled loans and accept a smaller return on their mortgage investment, the sources said.Read More »US Mortgages to Be Further Subsidized by the Government