US evaded the crisis – what would the default do to the world?
In the US the new fiscal year starts on October 1 but till now the Democrats and Republicans cannot come to an agreement and till now the Congress hasn’t adopted the supreme financial document of the country. The disagreement between the two political parties hasn’t been figured out regarding the threshold of the foreign debt. At present the threshold of the foreign debt is 16 trillion 700 billion USD. The deadline of the resolution of this matter was October 17. Otherwise America will have to go on a default. In this case the US wouldn’t be able to attain resources from foreign resources to tackle its financial obligations. America’s default would have tragic effects for the rest of the countries. It would create instability in the stock markets and bonds and would slow down the economic growth of countries. The president of the World Bank also has such an opinion. While many countries were awaiting the decision of the US government many experts, leaders and ministers from different countries believed that there won’t be default in America but the concerns were prevailing. By commenting on the situation created in the US, the former Central Bank President of Armenia Bagrat Astaryan told 168-Zham noted that the problem was resolvable and that there would be no default. “Similar situations have been repeating in the previous years. I remember several such cases but the parties ultimately come to an agreement. I think the situation will be resolved in the near future.” According to him, in this case this was an argument within the political system and wouldn’t affect the economy. “The US budgetary crisis would have no influence on the economic developments,” mentioned Asatryan. As o the US-AMD rate fluctuation in Armenia, Asatryan mentioned that the 1-2% fluctuation is not essential on the economy. “At the end of the year the AMD is slightly devaluated. It will be fixed. No need to worry.” In economist Haik Balanyan’s opinion, there would be no default in the US. But if it really happened then the whole world would suffer the consequences.
“The default would be a serious hit on the business activeness of the US economy, the plans of investors, financial transactions, import and export, etc. And having known, the role of the US in the world economy the rest of the countries of the world would indeed feel the impact. All these negotiations and disagreements are a result of political games and at a certain point they would be resolved and the parties come to a compromise,” said Balanyan. “If the US goes on a default it means the whole world is going to encounter the default because the whole world relies on the US dollar. The default would have a serious impact on the world economy,” told us the former deputy-minister of trade and economic development, deputy-rector of the state economic university Gagik Vardanyan. In his opinion, the US government is doing everything to avoid the default, “In any case, the world treasury is in the US.” Vardanyan mentioned that Armenia overcame the 2008 global crisis because the financial and banking system of Armenia is not tightly linked with the world economy and even now if there was a crisis it wouldn’t affect the Armenian economy so much. Nonetheless, yesterday the US Senate came to a consensus and proclaimed the budgetary compromises.
They have also agreed to raise the ceiling of the foreign debt to up to 17 trillion USD, which precludes the threat of a technical default. Afterwards, this bill will be signed by the US President Barack Obama. It is assumed that this peace between the Republicans and the Democrats will be temporary and the conflicts will resume in a few months.
By Gayane Khachatryan
