Senate Votes to Raise Debt Limit

The U.S. national debt limit has been unanimously raised by the Republican-led Senate on Thursday last week, allowing the Treasury to launch a record 8-year withdrawal of dollar liquidity from financial markets.

Thanks to a vote of 316 to 90, United States House of Representatives, on Sept 7, approved legislation to raise the debt ceiling and keep the federal government funded until December 2017 while providing $15 billion for relief from Hurricane Harvey that caused damage to Louisiana and Texas last month.

The deal was approbated by the Senate by 80-17. In addition to the 90 votes against mentioned above, all of the senators voting no came from Republicans.

“This agreement is a reminder that we don’t always have to wait until the 11th hour — risking shutdown, risking default — in order to compromise and do the right thing,” said Senator Chuck Schumer.

The commencement of the deal was an Oval Office conference between US President Donald John Trump, treasury secretary Steve Mnuchin and congressional leaders from both Democratic & Republican parties on last Wednesday. Trump totally agreed to tie hurricane relief to fund the government along with increasing the national debt limit for a three-month period, against with many congressional Republicans who have been opposed to lifting the debt ceiling without attending to reduce federal spending.

“The recovery effort for a record-setting storm like Harvey has strained resources to the limit already,” emphasized the Senate majority leader, Mitch McConnell, Republican of Kentucky. “The advance of another historic storm now makes the need for action even more urgent.”

Raising the ceiling of U.S. national debt could radically change the current situation. According to the Department’s marketable borrowing estimates announced in August, the US Treasury planned to borrow $501 billion in the final three months of this year, marking a record level since 2009. “These operations are going to withdraw a colossal amount of dollar liquidity from financial markets and could lead the Greenback to massively strengthen versus major currencies in coming months”, stated Alexei Mikheev, a VTB24 analyst. He also added that the Euro-US Dollar currency pair which has already advanced by 15% in last six months could face “a full collapse” at the end of 2017.
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