A majestic bungalow in the center of the city, the husband and wife are being paid with more than 1 lakh as a salary per month. The outsiders look at them and vexed because of their luxury and peaceful life. But the real fact is they borrowed huge debt from the bank based upon their creditworthiness and have to pay back money that they borrow. The obligor borrowed most of the debt in the form of loan from all the banks for the construction.
A wonderful pretty BMW parks at the entrance makes the passers eye to roll wide. A huge debt was taken for the car indeed at background. The low class people are better in debt than the high class people.
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| Critical Situation |
Do you believe the USA is in high debt crisis? This is the situation happening in United States of America right now. Due to the debt crisis, the USA Stock market and the related world market experiences the major earthquake from the month of May.
How did the Debt Crisis Acquires USA?
In general, how did the debt crisis come about? Many of the world’s poorest nations today have foreign debts that are greater than their entire national income in any given year. A significant portion of the foreign currency they earn from exports goes just to make their debt payments. For instance, on average one-third of all export earnings go to interest payments.
The First debit crisis acquires America at late 2003 when they fought down Iraq for the multiple charges on president sadam hussain. President Bush was an initial reason for arouse of debt crisis. From there, the richest and the super power nation start facing the breakdown in economic market.
US laid more than 800 army camps on various nations which prove their adamant character in making the people as refugee in their own country. This action leads to major investment on army which leads to the situation where US needs to get a loan from other countries in order to run their Government.
As the international market sliding downwards and the more money was invested in Middle East policy makes the US condition worsen. From there on, US runs their government by getting a loan from countries like China, Japan, India etc. As like Olympics, China holds the 1st place in lending money to dreamland USA. India holds 14th place by lending Rs. 1.83 lakh crores.
The condition gets even worse in the month of May 2011 by the release of credit rating from Standard and Poor Organization about the creditworthiness of an obligor. America attained the maximum threshold limit in getting a loan and they are not able to get a debit anymore. If this situation happens, Government has no money to run their governance efficiently.
Standard & Poor's (S&P) is a United States-based financial services company that publishes financial research and analysis on stocks and bonds. This company acts as a credit-rating agency (CRA) which issues the credit rating for the Government, the public and private corporations. Moreover this organization has been designated as a nationally recognized statistical rating organization by the U.S. They maintain a record and act as a general body to provide financial advices to the countries. Today Standard & Poor’s strives to provide investors who want to make better informed investment decisions with market intelligence in the form of credit ratings, indices, investment research and risk evaluations and solutions.
S&P suggest countries whether will it be safe to invest or/and lent a loan to the obligator by credit system. They provide an intelligence data about the market based upon the creditworthiness of the country, how much debt the country hold. This information really helps other countries to lend a loan to them.
On August 5, S&P issues the updated credit rating for USA. United States of America’s Long-Term credit rating has been lowered to 'AA+' from AAA based on Political Risks and Rising Debt burden. These changes in USA credit rating cause’s huge earthquake in the global market. Many nations stock market value faced huge drop-off. So many investors had withdrawn their investments from the US bond and starts investing on other nations bond and Gold. This action made a piece of gold to reach its high ceiling price neither the before.
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America decided to pass over this recession by taking some cost-cutting measures inside their own country. They decided to cost-cut the unnecessary money flow which will affects the employment in US. It will also affect the nations who are dealing in export trades with America.
America’s IT outsourcing of more than 60% has given to India. This type of global meltdown raises panic in India’s Information Technology sector. IT field will survive for time being as long as the project is outsourced to India, so the impact would be at later times. There are possibilities if America goes with a full swing of cost-cutting.
At present, United States of America stands 1st in global market and defense. If the situation continues as it is happening now, surely within 10 to 12 years, the giant China will take over the 1st place and US will be in huge debt to China.
Experts forecasting, by 2050 America will suffer a lot by disease of recession and their market value will go beyond below of India market.
References
- The Daily Thanthi, Chennai Edition
- Standard and Poors Financial Services Limited www.standardandpoors.com/home/en/us
