It was inevitable that a time of reckoning would come when the costs of the financial support packages and stimulus measures would need to be calculated by the US Congress. With loss of tax revenues from those who had been made unemployed by the global recession, payment of higher unemployment benefits and people tightening their belts to be factored in as well, it was little surprise that the deficit broke all records. The figure was estimated at $1.4tn (1.4 million million Dollars, or about $7000 per person) and has trebled the debt level from last year. The US Treasury is due to release the actual figures later in the month.
Analysts suggest that the full benefits of the stimulus package are yet to materialise since many of the construction projects have yet to start.
According to the Congressional Budget Office, the deficit is the equivalent of 9.9% of the US Gross Domestic Product (GDP) which implies that the US GDP is a very handy $14tn. The ratio of the GDP to deficit is the worst since World War 2.
A large deficit may weaken foreign sentiment towards US Treasury bonds which may be feeding in to the current weakness of the Dollar in the world’s currency markets. Ultimately, this may force the US government to improve the yield on Treasury Bonds to improve their appeal to investors.
The US Dollar closed up marginally against other major currencies.
In Europe, both the Bank of England and the European Central Bank are widely expected to maintain interest rates at their current low levels when they meet later today to set rates. Many observers think that low interest rates will continue to be a feature of the economic landscape until well into 2010.
Analysts suggest that the full benefits of the stimulus package are yet to materialise since many of the construction projects have yet to start.
According to the Congressional Budget Office, the deficit is the equivalent of 9.9% of the US Gross Domestic Product (GDP) which implies that the US GDP is a very handy $14tn. The ratio of the GDP to deficit is the worst since World War 2.
A large deficit may weaken foreign sentiment towards US Treasury bonds which may be feeding in to the current weakness of the Dollar in the world’s currency markets. Ultimately, this may force the US government to improve the yield on Treasury Bonds to improve their appeal to investors.
The US Dollar closed up marginally against other major currencies.
In Europe, both the Bank of England and the European Central Bank are widely expected to maintain interest rates at their current low levels when they meet later today to set rates. Many observers think that low interest rates will continue to be a feature of the economic landscape until well into 2010.