China has waded into the debate on the current (chaotic) US debt ceiling negotiations, with an editorial in the official Xinhua News Agency labelling US lawmakers ‘dangerously irresponsible’ for failing to come to an agreement.
With the August 2 deadline for an agreement on raising the ceiling looming, after which the US government ‘runs out’ of money, the editorial laments the United States faces a ‘catastrophic’ debt default, because US politicians ‘remain stubbornly engaged in what is widely seen as a game of chicken.’
The article notes that it’s still unclear exactly what will happen if the United States does default (although Megan McArdle, writing in The Atlantic, does a great job outlining the possibilities). Still, it warns that a US default ‘would trigger massive repercussions throughout global financial markets.’Enjoying this article? Click here to subscribe for full access. Just $5 a month.
‘In that case, the analysts say, developing economies would suffer a traumatic blow, and the world economy would plunge into yet another recession on the heels of the one that struck in 2008 and also originated in the United States – only the mess could be much nastier this time. Stock markets around the world have already displayed some signs of nervousness,’ the editorial says.
As MSNBC’s First Read notes, one of the problems with getting people into line behind an agreement has been that ‘the old rules to twist recalcitrant arms no longer apply. Tea Party and conservative House members don’t really care about important committee assignments. They don’t place a value on fundraising help. And earmarks and extra pork for their districts? Forget about it.’
Compounding the headache for the Obama administration was news today that the US economy grew less than forecast in the second quarter, after almost grinding to a halt at the start of the year.
‘Gross domestic product climbed at a 1.3 percent annual rate following a 0.4 percent gain in the prior quarter that was less than earlier estimated,’ Bloomberg reported. ‘Slower job and income gains raise the risk that a pickup in purchases during the remainder of 2011 will fail to materialize.’
Yesterday, in contrast, the Asian Development Bank reported that: ‘China's growth faces downward risk in the coming months amid global economic uncertainties and fast-rising domestic inflation.’ It estimated that China’s growth rate is likely to fall to 9.6 percent in 2011, from 10.3 percent last year.