“With a little scraping, the US can get money”
But time is running out for them, says Mujagic. “Between the time you have an agreement, parliament approves it, and the president signs it, you need 4.5 business days. Coincidentally, next Monday is a day off in the US. Delegates are then on a mini- recess. But if there is an agreement, they have to rush back to parliament to vote on it. This will be a major logistical job.’
podcasts | The United States is slowly approaching financial catastrophe
“US has only 1 day left”
What Mujagic is trying to emphasize is that the US has only one clear day left to reach an agreement. “If there is no agreement tomorrow, it will be very difficult to meet the June 1 deadline.” Yet there is still a way out, sees the economist. “With a little scraping, the United States can get money. Next week, U.S. companies are due to file their second-quarter earnings tax with the Treasury Department. So that generates some money.’
This is a fluke, sees Mujagic, but the US also has bills it has to pay itself. The good thing about this incident is that the next US interest payment on the debt is June 15th. So they can still stretch to June 15, without it technically going bankrupt.’ Mujagic describes the conditions as “a circus”.
“The interest rate is rising”
However, the problems don’t end there for the United States. Credit rating agency Fitch warns that the country will lose its top credit rating (AAA) if the debt ceiling is not lifted. If the debt ceiling is hit, the US will be labeled insolvent because interest cannot be paid. It will also make it difficult for the US to make new investments. If Fitch adjusts the valuation, it will be “bad news” for the US, Mujagic says. “So you can still take out loans, but at a much higher interest rate.”