Eight Days, Default or New debt ceiling
Eight days left to the debt ceiling deadline in U.S. the ghost of financial crises clearly appeared however the debt ceiling must be increased or the strongest economy will fail to meet obligations, “$16.7 Trillion the debt ceiling will be reached within the next nine days” experts said.
The White House says it wants a "clean" debt limit increase and that must happen on Oct. 17, 2013. That’s the day Treasury Secretary Jacob Lew says the United States would run out of borrowed money, putting the government in uncharted territory and creating the prospect of a first-ever default.
Washington's attention is turning to the debt limit even as it enters its second full week of a partial shutdown caused by Congress' inability to pass a spending bill. Although most of the 350,000 civilian Defense employees are going back to work this week, more than half a million federal workers remain furloughed. The House voted Saturday to give all federal workers back pay, but the Senate has yet to schedule a vote on the measure.
Japan and China, the biggest foreign debtors of the U.S. expressed concern over the risk of a U.S. default as President Barack Obama and Republicans remain locked in a fiscal stand-off.
Japan must consider the impact of a default on its Treasury holdings, even as the U.S. will probably avoid a fiscal crisis; the U.S. should prevent a default.
China owns $1.28 trillion in Treasuries and Japan has $1.14 trillion, according to the U.S. Treasury Department. Any shift in asset allocation by major holders of the securities could push up U.S. interest rates and cause swings in global currency markets.
Creditors must be aware that the absolute value of those debt holdings would decline. Nations such Japan and China that have a large proportion of dollar-denominated reserves need to think about this.