Everyone remembers that in early 2013 the U.S. economy, but more precisely, the valid U.S. budget encountered current money pressure that caused a risk of the so-called fiscal cliff threatening a tax hike and social expenditures curb. In practice, a sharp fiscal cliff did not happen. However, the U.S. President had to explain American nationals why healthcare and education would fall short of a massive part of the budget approved in late 2012. Besides, taxes had to be upgraded marginally for the whole population, although the Democrats had called for the tax hike only for the rich. Anyway, the U.S. government was able to meet the fiscal challenge and handle it smoothly. With the lapse of time, such awful words as “a fiscal cliff” faded from view mainly due to the fact that later in 2013 America faced even more severe turmoil.
The crisis in Cyprus did not combust on such a vast scale as in Greece. This is not only because Greece’s area is in large excess over the island state Cyprus, but also due to the fact that the Cypriot crisis concerned entirely the banking sector. Interestingly, the banking sector’s failure in Cyprus stroke mostly those deposit holders who are outside of Europe; that is why it was left without much financial investigation. The E.U. policymakers suggested the bailout package, implemented the money laundering scheme, and assigned the local government to conduct structural reforms to restore macroeconomic imbalances under the supervision of the Troika, or three loan suppliers such as the EC, the IMF, and the ECB. Russian deposit holders turned their attention to Latvia’s and Ireland’s banks, while Europeans put their trust in local banks, in particular banks from the countries with a credit rating above “Aa”. To sum up, the crash of private Cypriot banks cannot be considered as the event of the global or European scale since it gives place to other world events because of its local significance and some risks for shadow assets in the global markets.
In September, the Republicans and the Democrats were involved in bitter political fighting regarding the U.S. budget for 2014. The Republicans rejected flatly all Democrats’ proposals bearing in mind that letting down the Republicans’ budget draft the Democrats would never get approval to raise the state debt ceiling which had to be reached on September 17 and therefore could lead the economy to the default. Everyone understood that it would never happen, otherwise the involved parties would be found guilty; the Democrats would be accused of short-sightedness and the Republicans – of single-mindedness.
Eventually, the pro-Republican budget was passed; meanwhile, the government’s debt deadline was rescheduled. It is worthy of note that amid unwise bipartisan fighting in the U.S. Senate, Chairman of the Federal Reserve Ben Bernanke developed the clever policy. It is his quantitative easing program that is supposed to save the American economy, but not the senators and the President. Read the rest of this entry »