US President Barrack Obama has rejected to negotiate with the Republicans over raising the US borrowing limit, accusing them of attempting to get a ransom for not ruining the economy.
At Monday’s Press conference, held at the White House, President Obama vowed to not trade cuts in government spending in exchange for raising the nation’s borrowing limit or ‘debt ceiling’. The next big financial battle between the two sides comes just two weeks after the last ditch agreement over the ‘fiscal cliff’ that temporarily delayed spending cuts and tax hikes until February. The US government’s inability to agree until the last minute created lots of volatility in the financial markets and is a situation that many investors and traders want to avoid.
“What I will not do is to have that negotiation with a gun at the head of the American people,” he said Obama. “They can act responsibly, and pay America’s bills or they can act irresponsibly, and put America through another economic crisis,” he said. “But they will not collect a ransom in exchange for not crashing the American economy.”
The Republicans want the President to slash spending in an attempt to curb the nation’s massive deficit before they agree to raise the debt limit again.
“Obama must get serious about spending and the debt limit is the perfect time for it,” Senate Republican leader Mitch McConnell said.
In a move that several observers as deliberate and calculated the Republicans seem to be setting things up for a repeat of the 2011 debt ceiling fight in a gamble that Obama will not want to risk a repeat of the upset seen in the world markets at the time.
“The American people do not support raising the debt ceiling without reducing government spending at the same time,” said Republican John Boehner, the House of Representatives speaker.
The debt ceiling is just one of a trio of deadlines looming around the end of February, including automatic deep spending cuts that were temporarily put off in the “fiscal cliff” deal, and the end of a stopgap government funding measure.
All will undoubtedly see vicious infighting between Democrats and Republicans, and will almost certainly lead to a volatile impact on the markets. As long as uncertainty reins the US Dollar it will likely gain in strength as investors seek a safe-haven to shelter in. The latest newly listed reserve currencies such as the Australian Dollar and Canadian Dollar could also begin to embrace their new role as safe-havens as well.
“If congressional Republicans refuse to pay America’s bills on time, Social Security checks and veterans’ benefits will be delayed. We might not be able to pay our troops, or honour our contracts with small business owners. Food inspectors, air traffic controllers, specialists who track down loose nuclear material wouldn’t get their pay checks,” Obama stated.
“The issue here is whether or not America pays its bills,” he said. “We are not a deadbeat nation. And so there’s a very simple solution to this: Congress authorizes us to pay our bills. It would be a self-inflicted wound on the economy, even entertaining the idea of this happening, of the United States of America not paying its bills, is irresponsible. It’s absurd.”
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The Euro to US Dollar exchange rate is currently trading at 1.3354
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