Tags: UBS US Govt Can Finance Itself Through Aug. 8

UBS: US Govt Can Finance Itself Through Aug. 8

Monday, 25 Jul 2011 09:31 AM

The government has said it will default on its obligations by Aug. 2 if Congress doesn't lift its $14.3 trillion debt limit by that day. Credit ratings agencies have said the country could lose its AAA ratings if that happens, and Treasury Secretary Timothy Geithner says the deadline cannot be extended.

That's not altogether true, say analysts at UBS Warburg.

Even if a deal isn't reached, the government has enough money stashed aside to function normally until Aug. 8 and possibly through Aug. 10.

"UBS analysis suggests (the U.S.) Treasury has the funds to make all payments until about August 8th - 10th," Chris Ahrens, head of interest rate strategy says in a note, according to the Wall Street Journal.

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Treasury Secretary Timothy Geithner
(Getty Images photo)
There is a "rising probability" of a downgrade of the rating on U.S. long-term sovereigns, a scenario that is possible even if the U.S. avoids default, Ahrens adds.

Congressional Republicans and Democrats want to lift the ceiling but are at odds over how to narrow deficits in the process, with the former opposed to tax hikes and the latter opposed to certain spending cuts.

Geithner, who first warned of the problem back in January, says the situation is getting urgent.

"It's taken us seven months to get to the place where we are now," Geithner tells CNN. "We're almost out of runway."

Ratings agencies warn that a default could wipe out economic recovery.

"Even if Washington did raise the debt ceiling after just a few harrowing days following a default ... we envisage that the economy could fall quickly back into recession," Standard & Poor's has said, CNN adds.

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The government has said it will default on its obligations by Aug. 2 if Congress doesn't lift its $14.3 trillion debt limit by that day. Credit ratings agencies have said the country could lose its AAA ratings if that happens, and Treasury Secretary Timothy Geithner says...
UBS US Govt Can Finance Itself Through Aug. 8
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2011-31-25
Monday, 25 Jul 2011 09:31 AM
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