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- The U.S. Senate has passed the debt ceiling bill preventing the U.S. from defaulting on its debt which would have been the first event of its kind.
- The bill won with a landslide 63 vs. 36 votes within 48 hours after the House passed.
- European stocks have turned around positively following the news that the U.S. wouldn’t default on its debt.
- Economists and on-lookers have shown mixed reactions on Social Media regarding the debt ceiling deal and its effects on the U.S. economy as de-dollarisation plans spread globally.
U.S. Senate prevents a possible debt default
The U.S. Senate has passed the Fiscal Responsibility Act that allows the U.S. to have no cap on the debt ceiling until January 2025. The bill had a landslide win with 63 vs. 36 votes on Thursday night, a day after the House of Representatives had barely passed it.
The new bill will be signed by the U.S. President soon ahead of the June 5 deadline that the Treasury gave as the final date that it would be able to pay its bills. While this bill has helped the nation avoid the first-ever debt default in its history, it has received mixed reactions.
The bill has been projected to allow the printing of $4T more whilst no significant spending cuts have been seen, which has made several lawmakers react with financial experts condemning it since international domination of the U.S. dollar remains in jeopardy now more than ever.
E.U. stocks rise as the U.S. Senate averts a debt default crisis
European Stock markets are headed in a positive direction as they opened higher on June 2, 2023, following news that the U.S. Senate had voted in favour of a bill that would see the nation not defaulting on its debt.
The ongoing debate to deal with the debt ceiling crisis has been going on for the past two weeks but never without influencing global stock markets though slightly. Though it has been settled now, it has just dealt with a minute issue in the U.S. economy as a recession could be possible as it’s reliant on the decisions the federal reserve will make regarding the progression of interest rates.
Recent comments from officials show that the federal reserve may choose to skip the interest rates hike in June as some prospects of the market, like jobs data, are coming out stronger than expected. However, it’s still a difficult decision as the market is sending mixed signals; mortgages are up, but the housing sector has yet to kickstart a price meltdown. Today will see the release of a closely watched labour report that may influence the decisions of the Federal Reserve in June greatly.
Though there is a possibility of rates pausing in the U.S., the ball will most likely roll differently in the U.K. ECB president Christine Lagarde has commented on the current 6.1% inflation rate that is haunting the nation, saying it’s still way too high to suspend interest rate hikes. ECB officials have also been giving signals that interest rates will continue being hiked until the bank closes near the 2% inflation rate target.
Investors, financial experts and on-lookers weigh in on the U.S. debt ceiling deal
The ongoing tension between U.S. and BRICS economic bloc has caused several investors, financial experts and observers to condemn the recently passed Fiscal Responsibility Act. The U.S. is set to go into a money-printing frenzy without a debt ceiling cap until 2025, which concerns several experts.
While it is significant that the U.S. will not default on its debt and cost over 8 million jobs sending millions more below the poverty line, some experts like Balaji feel that the current situation in the U.S. economy will most likely be a liability in the long term.
In his argument, Balaji says that the U.S. dollar will still be in a crisis as international investors are not buying treasury bonds but prefer gold and its financial products. He says that the collapsed banks were buying the Treasury bonds only to realize later that they were interacting with the “new toxic waste.”
Other Representatives of the House had aired their thoughts on the bill condemning it and saying that they wouldn’t vote for it. Though it passed, they felt it would not serve the country well.
Hilariously, one citizen posted a cartoon reaction that depicts poor leadership as the reason behind the financial crisis in the country. He sarcastically thanks President Biden for passing the bill in the U.S. Senate.