Information System in Retail Sector
Introduction An important element of the supply chain is the retail. Retail is the place where the products and goods are sold to the end users. Retailer purchases goods and products from producers in large quantities and in turn sells them to consumers in smaller quantities. Information Flow It is very important for the retailer […]
Cultural Aspects of Cross Border Mergers and Acquisitions
How Culture Impacts Cross Border Mergers and Acquisitions With the advent of globalization, it has become common for western multinationals to indulge in mergers and acquisitions with companies in the emerging markets. The process of entering those markets is usually through the Greenfield route that entails huge investments and takes time as the plants and […]
How the Philippines Beat India at its Own Game
The Philippines is a small country nestled amidst a scenic archipelago in South East Asia. There wasn’t too much to speak about the economy of the Philippines till the recent past. The country was mostly run by primitive businesses such as agriculture and mining. Filipinos who were highly educated would often leave the country. They […]
Cost Estimate and Accounting in ERP
The costing module is one of the important controlling modules which enables effective internal cost control and accounting. All functionalities regarding cost analysis and cost allocations are provided by this module. The cost accounting module is highly integrated with budget and general ledger modules as well as draws input and provides output to various logistics […]
What is Learning Curve ? – Meaning and Concept
Introduction In any environment if a person is assigned to do the same task, then after a period of time, there is an improvement in his performance. If data points are collected over a period of time, the curve constructed on the graph will show a decrease in effort per unit for repetitive operations. This […]
A hot topic among investors, economists, and stock market experts these days is the looming fight over the debt ceiling in the United States. Many commentators have been discussing this incessantly pointing to the consequences for the world at large. Before launching into the specifics, it is worth discussing what debt ceiling means. Like a household that has to balance its expenses and income every month, the governments around the world have to balance their budgets every year.
Like many people who borrow the shortfall between their income and expenses, governments have to borrow as well if they are running a deficit. Of course, in the case of the United States, the deficit can be financed simply by printing money since the Dollar is the reserve currency of the world meaning that the Federal Reserve can rescue the US Government by buying up the bonds. India, on the other hand, cannot print its way out of its entire debt since it has to pay for the imports in Dollars and not Rupees.
Turning to the debt ceiling, this term denotes the limit to which the US government can borrow. The US Congress and the Senate has to increase the limit every year and the present fight is over high it can be raised. Unless the legislature increases the debt ceiling, the executive cannot borrow and even if the Fed were to buy up the bonds, the limit has to be raised first.
The next aspect here is the fact that even the Fed cannot go on buying up all the debt issued by the US government since that would lead to rampant inflation and an implosion in the debt markets.
Third, the US government cannot go on borrowing indefinitely (which is the case with India as well where the Fiscal deficit is becoming a matter of concern) because that would be like a household that decides to stop paying its debts and continues to borrow which would ultimately lead to anarchy.
The scenarios talked about are very likely and though one might not see the US defaulting on its debt (which some experts are already predicting); the prolonged uncertainty would lead to market turmoil and mayhem in the financial world. Therefore, one can expect some high stakes negotiations over the next couple of months as both the Democrats and the Republicans lock horns.
The implications for the world is that the United States is simply too big to default without taking down the global economy down with it. Hence, no matter what your position and situation are, chances are that you would be affected by this issue as the world economy is too integrated and too interconnected for you to ignore.
Finally, even in the expectation that the debt ceiling is raised, it means that the future generations have to pay the price, as this would be akin to a household passing on their debts to their children.
Your email address will not be published. Required fields are marked *
What the Current Wave of Protectionism and Populism mean for the Future of Globalization and Free Trade
February 12, 2025
