Dollar Continues Slide - Spectre Of US Financial Default Looms

The Daily Telegraph ^ | 24 June '02 | Simon English

[rdavis84]

Dollar Continues Slide - Spectre Of
US Financial Default Looms
By Simon English in New York
The Daily Telegraph - London
6-24-02

America's shaky financial position got markedly worse yesterday when the slide in the value of the dollar accelerated and a political row left the government in danger of defaulting on its debt. Republicans in the House of Representatives are refusing to back an increase in US debt levels in the latest dispute with the White House over economic policy.

 

The government needs another $450 billion (£300 billion) to meet immediate bills but is facing opposition from politicians alarmed at a predicted budget deficit of $150 billion this year.

 

US Treasury Secretary Paul O'Neill warned: "If they don't act we are going to hit the wall, probably by next weekend because on Sunday we've got to certify social security payments and other large payments."

 

A $1.3 trillion tax cut, a declining economy and massive costs from the war on terrorism have left the US short of cash. It will dip into its social security surplus to balance the budget.

 

Another bad day on Wall Street was aggravated by further falls for the dollar, as foreign investors grow increasingly pessimistic about the prospects for the world's biggest economy.

 

The euro traded at more than 98 cents for the first time since February 2000, up from 87 cents since April, while sterling rose to a 22-month high of $1.5084. Analysts at Citibank now expect the euro to reach $1.02 in the next three months.

 

An attempt by Japan to weaken the yen by buying dollars had only limited success. It sold around $4 billion of yen, yet the Japanese currency soon recovered to 121.21 per dollar.

 

The Dow Jones fell more than 100 points in morning trading in New York and was down 56 points at 9197 by early afternoon. Nasdaq, the technology market, briefly fell below its worst level since the September 11 attacks, down 8 points at 1422.

 

Bleak profits, corporate scandals and terrorism fears have left investors reluctant to buy shares, causing the biggest half-year losses since 1970. Minor rallies are repeatedly followed by an immediate selling spree. A downgrade from UBS Warburg for technology giants Lucent and Nortel also rocked sentiment. Goldman Sachs lowered earnings estimates for IBM.

 

Analysts assume the Bush administration is involved in a game of brinkmanship with political opponents, who are thought certain to approve new borrowing later this week.

 

However, the government has already been forced into cancelling its usual weekly sale of Treasury bills, the equivalent of gilts, while it awaits permission to raise new money. The slightest government default on debt would have a dramatic effect on the stability of stock markets.

 

Mr O'Neill has faced fierce criticism for his handling of the economy and for "loose cannon" comments when he seemed to question whether a strong dollar was best for the US. His enemies could use his urgent need for funds to inflict further damage on his reputation.

 

Figures this week on consumer confidence and factory orders are eagerly awaited for signs of a recovery. Consumer spending, two thirds of the economy, is likely to have faltered.

 

Alan Greenspan, chairman of the US Federal Reserve, will make a decision on interest rates tomorrow. He is expected to leave them unchanged. 

 

http://www.telegraph.co.uk/money/main.jhtml

[gjpino]

Good thing we're spending all this new money on Education, Housing, Farm Welfare, etc.

How refreshing it is to have a fiscal conservative back in the White House.

[Blackyce]

I like how the author uses his title to link two completely unrelated issues to create a sense of impending doom. WHAT?! You mean this isnt my literary criticism class??? This is actual newscopy!?!

[Timesink]

I can't think of a better argument to use to destroy the RATS than that they held up the bill to the point the US entered default, a situation that would have extremely negative repercussions for the US financially for years to come. If you think the public got pissed off about the GOP "shutting down the government" back in the '90s, wait until they hear about this!

[DrDavid]

If you think the public got pissed off about the GOP "shutting down the government" back in the '90s, wait until they hear about this!

Who's going to tell them? The US press? I don't think so.

The Telegraph is a conservative leaning London Newspaper somewhere to the right of the The Times.

[Sid Rich]

Won't that kind of talk get you banned around here under the "excessively criticizing the President rule?" ;)

[gjpino]

It already did (under another name).

[rdavis84]

"Won't that kind of talk get you banned around here under the "excessively criticizing the President rule?" ;)"

All we've got to do is GET CONTROL of the Senate!!!

BTW, I think gjpino violated something in the USPATRIOT Act!

Let's turn him/her in :-)

[Allrightnow]

"I like how the author uses his title to link two completely unrelated issues to create a sense of impending doom."

This author is not alone. It seems as though the press may finish what Bin Laden started. All the negativity is undermining US confidence in the economy and international confidence in the dollar.

[rdavis84]

I'm Shocked!!!!!!

:-)

[rdavis84]

"This author is not alone. It seems as though the press may finish what Bin Laden started."

This Author is writing an English assessment for a British Paper. They're not on the Euro,(yet) and many European Nations don't appreciate the resulting lack of confidence in the dollar that Criminal Activity by AMERICAN (ie; Anderson, Global, Enron, Tyco, etc.)players have wrought.

And Please don't bring Clinton or Bush either one into the "fault spotlight". This is a result of pure and simple systemic GREED in our culture. And it permeates both Parties, and almost Every Large Corporation.

[Zack Nguyen]

It will dip into its social security surplus to balance the budget.

What Social Security surplus is that?

[agarrett]

I can't think of a better argument to use to destroy the RATS than that they held up the bill to the point the US entered default, a situation that would have extremely negative repercussions for the US financially for years to come.

  Except that, according to the article anyway, it's Republican congressman holding up the bill.

Drew Garrett

[jonatron]

$ bump

[Timesink]

  Except that, according to the article anyway, it's Republican congressman holding up the bill.

Yes, you're right. My mistake for reading too fast.

Which RINOs are trying to destroy our chances in November?

[Tauzero]

"How refreshing it is to have a fiscal conservative back in the White House."

BUMP!

[Sabertooth]

Which RINOs are trying to destroy our chances in November?

That would be the ones pushing all of the "me too" compassionate conservative social spending... All of the vote buying and pandering that's going to enable us to "TAKE BACK THE SENATE!"

Always capitalize magic RINO words.

[Sid Rich]

If Bush gets control of the Senate...the money may really start to fly out the door. Every bedrock conservative I talk to in my neck of the woods is stunned at his actions in the last 4-5 months.