ECONOMISTS SUGGEST “PRAYING” FOR THE DESPERATE SITUATION IN USA!
As the Obama administration experiences difficult times following the recent government shutdown crisis in USA, it is indicated that FED, Federal Reserve System, who gave “the go-ahead to bond buying program” last month, is likely to maintain this attitude. Economists state that October 17 is the critical date for the country, and in the event of failure to get an authorization for additional borrowing on that date in the U.S Congress, a crisis similar to that of in Turkey where the Constitutional Code Book was thrown in 2001, is to be expected. According to the economists, the most rational solution is to pray and wait until things come to a resolution.
Assoc. Prof. Dr. Coşkun Küçüközmen, Lecturer at Izmir University of Economics Department of International Trade and Finance, stated that the “government shutdown” crisis in USA was similar to Constitutional Code Book throwing crisis in Turkey in 2001, and he said, “The period until October 17 in America is a critical period. Because, the rumours about USA going into default gives us the warning signals about the extent of danger we are to face in the near future.”
The Democratic-controlled Senate and the Republican-controlled House couldn't come to an agreement on the budget, and as a result the government shutdown kicked in, in USA. Assoc. Prof. Dr. Küçüközmen, who reviewed the crisis in terms of international finance, said, “Discussions over health reform and debt ceiling between republicans and democrats resulted in government shutdown in America on October 1. US Federal government stopped almost all business and sent non-essential employees home to take a leave without pay. In this case, Federal Reserve System, who gave “the go-ahead to bond buying program”, last month, is likely to maintain this attitude.”
Assoc. Prof. Dr. Küçüközmen indicated that the debt ceiling due date was October 17, and he stated the following:
“If the debt ceiling is not increased, USA will have to stop paying for its debts and go into default. However, this, which would cause an economic downswing worldwide, is less likely to happen. Even though we are few days short of October 17, it is best to be cautious by conducting stress tests and reflecting the outcomes on the short term policy choices. Majority of the global financial system is based on the long term USA treasury bonds. It is difficult to estimate the outcomes of USA going into default in an environment where dollar is as world reserve currency, since USA never went into default up until now. Limited actions during a period of uncertainty are the biggest constraint. The most rational solution would be to pray and wait until things resolve.”
