The Super Committee Represents the U.S. Debt Problem in a Nutshell

I think it didn’t surprise anyone that the Super-Committee failed to reach an agreement among its members to cut at least $1.5 trillion from the Federal Budget over the next decade. This failure and the low expectations from this Super-Committee are probably the best representation for the U.S. government’s handling the U.S debt. The current partisan gridlock might eventually pressure the Fed to engage another stimulus plan.  

Last time the markets stirred up over the U.S. debt was back in August when the House voted at the last minute to raise the U.S. debt ceiling by $1.2 trillion. A few days later Standard and Poor’s downgraded the U.S.’s credit rating from AAA to +AA.

For the complete analysis see here in Trading NRG

This time the debate was over the Super-Committee’s attempt to reduce the Federal Budget over the next 10 year by $1.5. Following the Committee’s failure there is a “trigger mechanism” that will enact a $1.2 trillion automatic budget cut over the next decade. Many already claim that this “trigger mechanism” won’t be triggered.

Despite this failure, Standard and Poor’s rating agency didn’t change U.S’s credit rating and left it at +AA.

I’m sure that Ben Bernanke, the Chairman of the Federal Reserve, is watching the debates in Washington; if the debacle of the debt reduction will continue, it will likely to raise the odds of another monetary intervention by the Federal Reserve in the near future.

In the mean time the financial markets continue to suffer with sharp falls in the American stock markets that will probably drag down major commodities prices.   

For more on this subject:

U.S. Federal Deficit Inclined by $98 Billion in October

The House voted for raising U.S. debt ceiling by $2.1 trillion

Gold and Silver Prices Monthly Outlook for November 2011

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