US reaches debt ceiling

Yesterday, the US was about to reach the debt ceiling set by the Congress, which stood at about 14,300 billion dollars.

Under these circumstances, the American authorities will resort to the Federal pension money, according to a Treasury official, quoted by Reuters. The use of the retirement money is part of the measures that the Treasury can take to successfully continue to honor its financial obligations, including paying off the debt coming due in August. The decision would provide the presidency and the US Congress with a respite needed to negotiate on the raising of the debt ceiling.

If Congress doesn"t go through with raising the borrowing limit, the US will have problems honoring its debts, which could lead to a new financial crisis. US Treasury Secretary Tim Geithner warned that given the circumstances, the government could be forced to freeze spending, and default on payments to investors, companies, its citizens and the army, creating a shock in the American economy. According to Geithner, the world"s largest economy could fall into a new recession.

There are however voices that claim that the American economy will not be significantly affected, if the debt ceiling isn"t raised.

Last month, financial ratings agency "Standard&Poor"s" revised its outlook for the US rating downwards, from "stable" to "negative". This was the first downgrade since the agency was created in 1941. Since that time, the US have constantly had the highest possible rating of "AAA", with a "stable" outlook.