1. WELCOME

2. SHOULD U.S. RAISE ITS
DEBT CEILING?

3. THE FLOW
• The Current Scenario
• How did they reach here
• Why do you need debt ceiling?
• The Criticality of the situation
• Issues if they raise and if they don’t raise
the ceiling
• Open Forum

4. CURRENT SCENARIO
• US $14.29 trillion
• 96% of GDP
• AAA rating since 1917

5. Have High Debt and High Rating
Why US has been able to raise so much money

6. THE DOLLAR
• Largest industrial base and surplus of dollar
backed by Gold post 2nd world war.
•1971: The Dollar was fixed as Reserve Currency.
• 1973 oil crisis: Increase in US treasury bills
held by central governments
•As a result demand for Dollar increased in the
world arena.

7. WHO IS HOLDING THIS DEBT

8. DEBT CEILING

9. DEBT CEILING
• Limits the amount of public debt that
can be outstanding.
• Prevents the U.S. Treasury from
issuing new debt once the limit has
been reached.

10. IMPORTANCE OF DEBT
CEILING

11. IMPORTANCE OF DEBIT CEILING
• Provides Congress with the strings to
control the federal purse
• A form of fiscal accountability
• Compels Congress and the President to
check their debt borrowings

12. But you can always increase it

14. The REASONS
From a forecast annual surpluses of
$850 billion for 2009–2012 to deficit reality of
$1,215 billion

20. How serious is this issue of Debt ceiling

21. Default in
payment

22. Default in Employment
payment

23. Default in Employment
payment
Inflation

24. Default in Employment
payment
Inflation Exchange
Rate

25. GDP
Default in Employment
payment
Inflation Exchange
Rate

26. GDP
Default in Employment
payment
National
Income
Inflation Exchange
Rate

27. GDP
Default in Employment
payment
National
Income Stock Market
Inflation Exchange
Rate

28. GDP
Default in Employment
payment
National
Income Stock Market
Inflation Exchange
Rate
Dollar Value

29. GDP
Employment
Default in
payment
Interest National
Rates Income Stock Market
Inflation Exchange
Rate
Dollar Value

30. IF THEY DON’T RAISE THE
DEBT CEILING

31. • Decrease in Expenses
• Effect on Stock Market
• Sky High mortgage and Interest rate
• Treasury Bond Collapse

32. BUT WHAT IF THEY RAISE
THE DEBT CEILING

34. Dollar weakens

35. Imports
• Imports become dearer.
• End up paying more money for same quantity
of goods purchased.
• Pace of economic growth rate slows down.

36. Exports
• Exports become cheaper.
• Importer country ends up buying same
amount of goods for a lesser price.
• As a result of increase in exports, the trade
deficit might decrease.

37. INFLATION
• As imports get dearer, inflation increases.
• Prices of goods increases.

38. INTEREST RATES
• As a result of increase in inflation, the interest
rates will go up.
• Investor confidence will go down.
• As a result the investment in the economy will
go down.

40. CAPITAL FLIGHT
• Flow of funds or investments from develop to
developing countries.
• Increases unemployment in the country.

41. CAPITAL FORMATION
• Investments and capital formation are
positively correlated.
• As investments go down rate of capital
formation goes down.
• Hence government needs money to initiate
investments and growth in the economy.