Saturday, 30 July 2011

Apparently we should be worried. Odd things are happening, like the Australian dollar jumping in value to over US$1.10 - the highest it has been since the currency float of 1983 - and the Australian stock market's S&P/ASX 200 index falling almost 40 percent in a single day to its lowest level since the depth of the global economic crisis in 2009. While we're told Australians are saving more than ever - retailers are grumbling loudly - the fact is that this latter movement probably has to do with our indebtedness to foreign lenders. Both movements are due to uncertainty deriving from the US debt limit drama that's being played out in Washington, DC.

From here it's a little obscure in its details but the amount of press the House of Representatives debate on lifting the debt cap is receiving gives you some indication of how some elements in the US are taking the crisis. If the debt limit ($14.2 trillion, currently - a truly staggering sum of money) is not lifted as a result of legislative fiat by Tuesday the US government will have to start stopping payments to some creditors, or stop paying public servants or welfare recipients. Or stop paying soldiers. Or cut back on its morning coffee. Or raid the piggy bank. Or something. It's causing major ructions Stateside. The country is fighting costly wars in Iraq and Afghanistan and continues to be beset by economic headaches resulting from the GFC. Both of these things are attributable Republican Party policies implemented to this point but it's the Republicans - with a majority in the House of Representatives and a minority in the Senate - who are now causing global markets to see-saw as investors seek safe havens for their cash. Gold has increased in value to well over $1600 an ounce. The Australian dollar is rising in value as investors buy Australian government bonds as a secure place to park their money.

Compounding the US-led uncertainty is the debt problem in some European countries, notably Greece, Italy, Spain and Ireland. In Greece there have been, in the last month, street riots resulting from legislative moves to cut government spending. European bankers are wary about bailing out the Greeks and have set conditions on future funding. Whether governments there can keep the vessel balanced and afloat remains a question.

More engaging because it's available in English to global audiences in the Anglosphere is the US House crisis. Republican House speaker John Boehner needs to secure the support of some newly-elected Tea partiers in order to pass his bill but they're "holding the line" - a novel catchphrase heard in street rallies among Tea Party diehards. They're refusing to accede to the bill's conditions and are asking for further austerity measures in order to put pressure on the Democrat president, Barack Obama. Needless to say we anticipate a lot more fevered press coverage of this legislature impasse as the next few days drag on for politicians and reporters on the Washington political beat. Who will say "Uncle" first - the Republican House or the president? It's up in the air like a balloon shaped like a cosmic tarantula. Be afraid.

UPDATE 8.35am: Boehner's bill just passes vote in the House but the Senate majority leader says it's "dead on arrival" in the Senate.

UPDATE 4.35pm: Democrat Senate refuses to pass House bill and it is defeated solidly almost immediately in the Senate.

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