IMF Wants US Debt Limit Raised Immediately
July 11th, 2011
Written by Pedro Martinez
Pedro’s Page: http://www.ovlg.com/
The International Monetary Fund or IMF insisted on raising the borrowing limit in United States immediately. IMF warned the U.S. lawmakers that a failure to raise the nation’s borrowing limit would pose serious risks to the global economy and financial markets. There are reasons to believe IMF’s predictions. It has built its reputation over the years. Now 187 nations are members of The I.M.F. and it lends money to countries with balance of payments difficulties. It also keeps a close eye on national financial crisis which could affect the world economy in the long run.
What is debt limit?
The debt limit refers to the amount the government is allowed to borrow to conduct financial operations. The United States has recently reached its $14.3 trillion borrowing limit in May 2011 and the risk of defaulting on its debt looming large over US, if they don’t agree to raise that limit by Aug. 2. According to Treasury Secretary Timothy Geithner the country is heading towards a default on its debt. John Lipsky, acting managing director of the IMF, opined defaulting “would have very serious and far-reaching consequences.” in the forthcoming years.
It is been presumed that defaulting on its debts would rattle markets and interest rates would be sky rocketing. The mortgages and other consumer loans would become more expensive as well. Lipsky had given a ray of hope that Congress will certainly make a move before such things take place.
In fact, President Obama and Republican lawmakers have been at odds on a plan to raise the debt limit. According to President Obama relieving selected tax breaks for oil companies and the super-wealthy is part of any deficit reduction plan. He contemplates that a bipartisan agreement is possible to cut deficits, raise the government’s debt limit and evade a threatened financial crisis. However cutting the deficit too quickly could hold back the weak recovery.
The I.M.F. forecast seriously affects the growth of American economy this year and next as the fund anticipates that the economy would expand 2.5 percent this year and 2.7 percent in 2012. As consumers will continue to pay off debts, their buying power and budget cuts at the federal would be considerably reduced and accordingly state and local levels would also check their demands.
To conclude, many private forecasters are pessimistic and reflects the I.M.F.’s point view. To know what is in store we have wait and see.
Author Bio: Pedro Martinez and a contributory guest columnist for various websites and communities including Oak View Law. He has completed his Masters in Finance and is currently working with an Investment company located in California. He has written some great articles on topics like mortgages, refinance, credit-card-debt-consolidation, credit-card-debt-relief, credit-card-debt-settlement, bankruptcy, working from home, investment opportunities, etc.