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Who Defaults First: Greece Or The Us?

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With its next tranche of money from the IMF-EU bail-out now assured, we can say with some confidence that the Greek government will not default next month. Incredibly, the same cannot be said of the US Federal Government. The world is a lot more dependent on the "full faith and credit" of the US than it is on Greece.

A default by the US government - even a temporary, "technical" default - would be a very serious matter, not only for the US but for the global financial system. That is why the smart money has always said it won't happen.

Between 3 and 31 August, the think-tank reckons the federal government will have $172bn in revenues and nearly $307bn in spending commitments - meaning a deficit of just over $135bn. In theory, if the president can't borrow to fund that shortfall, he has to find a way to cut the government's outgoings by 44%. Overnight.

It's not just that they'd rather not have to explain why they're holding back money from veterans to pay interest to Wall Street; why money market funds are more important than food stamps, say, or paying federal workers.

What's the way out of the impasse? "Simple", say Republican leaders. All the president has to do is agree to cut spending by $2 trillion over the next 10 years, without a penny in tax increases.

It's hard for politicians to do the right thing. Especially 15 months from a general election.

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The clock is ticking, will it be different this time will the debt ceiling not be increased?

But if the polls are to be believed, few Americans do. Indeed, 70% say they don't want to raise the debt ceiling at all.

It would be interesting to know what the question was and who's asking it.

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If there's no agreement in the legislature, Obama will ignore the debt ceiling and carry on spending. And nothing much will happen.

Just like in the EU.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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