The US House of Representatives has passed by 269 votes to 161 a last-gasp deal to avoid a federal debt default.

The bill is expected to be approved by the Senate and signed into law by President Barack Obama on Tuesday.

It raises the debt limit by up to $2.4tn (£1.5tn) from $14.3tn, and makes savings of at least $2.1tn in 10 years.

http://www.bbc.co.uk/news/world-us-canada-14367754

Spend 2.4 trillion today and save 2.1 trillion in ten years?... Oh boy, this sound like my stretched credit card statement...

President Barack Obama, who once lectured Europe on why spending and investment is the best cure for a recession, was yesterday contemplating the consequences of an emergency debt-ceiling deal that will suck more than $2 trillion (£1.2trn) out of a still shaky US economy over the next 10 years.

Enormous concessions from the White House to satisfy demands largely driven by the radical Tea Party flank of the Republicans provided the key to unlock the door to a deal, approved in the House of Representatives last night. It would enact deep spending cuts in return for a new authorisation to raise the US debt ceiling and draw America back from the brink of defaulting on its debt.

To the disgust of many in his own party, Mr Obama caved on his demands that the deal have "balance" between spending cuts and increases in tax revenues. Of the latter, there are so far none.

http://www.independent.co.uk/news/world/americas/obama-forced-to-swallow-tea-partys-demands-as-deal-is-reached-2330259.html

It is becoming predictable, but it is still unnerving. Every few weeks either Europe or the United States marches up to the financial cliff edge, has a huge argument with itself, peers over into the abyss and then backs away.

This weekend the world watched on tenterhooks as America's quarrelling politicians raced against the clock to prevent a default on its massive debt. At the time of writing the last-minute fiscal package agreed between the President and Congressional leaders has passed the House of Representatives and is about to be voted on by the Senate. The betting is that it will secure approval, but no one thinks this weekend's emergency marathon has settled the matter for long.

Two weekends ago it was Europe's turn. As per usual, its leaders were split over how to rescue Greece and the entire euro project was said to be at risk. Panic over, the euro is still afloat. But, just as in the US, everyone expects that there will soon be another nail-biting few days, as the eurozone struggles once again to stave off meltdown.

On the face of it, none of this makes any sense. Raising the US debt ceiling, the cause of last weekend's crisis, is something that has been done hundreds of times before. Bailing out Greece, Ireland and Portugal, though certainly expensive, should not be beyond the European Central Bank and the eurozone governments acting in concert. England, after all, has been carrying Scotland, Wales and Northern Ireland, for as long as anyone can remember.

Pew came out with a new poll on Monday confirming what we all already knew: The American people think the last several weeks in Washington have been a disgrace. In fact, the words most often volunteered to the pollsters were “ridiculous,” “disgusting,” and “stupid.” The response was negative from 75% of Republicans, 72% of Democrats and 72% of independents. More than twice as many people have a more negative view of President Obama (38%) because of the debate than a more positive view (18%). Three times as many people have a more negative view of Speaker John Boehner (34%) than a more positive view (11%).

There were, in short, no winners in the last few weeks of debt debate. White House officials pointed to this fact in a briefing with reporters on Sunday night, when they explained why Republicans gave up their demand for another debt limit vote early next year. “The case against it made itself,” an official said. “I think people said, ‘Why on Earth would we want to go through this again?’”

There is also little evidence that Republican and Democratic leaders learned their lessons. There will still be at least two more big Washington showdowns over the next 15 months. They are likely to follow in form, if not substance,  the same pattern as the debt debate: lots of phony posturing, theatrical walk-outs, discussion breakdowns, selfish preening, non-factual assertions and, finally, at the last minute, an agreement. In December, Congress will have to cut $1.5 trillion more from 10-year deficit projections, or face draconian cuts to Medicare providers and the military. A year later, in December of 2012, Congress will have to reach a deal on tax reform, or watch all of the George W. Bush tax cuts from 2001 expire, effectively raising rates on millions of middle-class families, a policy which neither party favors.

Russian prime minister Vladimir Putin has attacked America as a "parasite" on the world economy and argued that Russia and other countries should seek new reserve currencies to stop "a systemic malfunction" in the US spreading. Putin made his belligerent remarks during a visit to a pro-Kremlin youth camp where he also joined in activities such as arm wrestling and wall climbing.

As US president Barack Obama announced his last-ditch debt deal yesterday, Putin told the youth rally that America was "not living within its means", according to AFP. It was also "shifting the weight of responsibility on other countries and in a way acting as a parasite", he added, evoking a term used by Soviet leaders to demonise those who did not work, study or serve the Communist state.

Putin also called for Russia and countries such as China to look to other reserve currencies as well as the US dollar. Russia currently keeps almost half its reserves in US assets such as bonds and treasuries.

Some observers noted yesterday that Putin's visit to the Nashi ('our people') lakeside youth camp in central Russia was only the latest in a string of public appearances in the run-up to the December parliamentary elections.

Moody's had placed U.S. ratings on review for a possible downgrade on July 13, fearing that the government could miss debt payments if lawmakers failed to increase the country's legal borrowing limit by early August.

http://www.nytimes.com/reuters/2011/08/02/business/business-us-usa-rating-moodys.html?_r=1

WASHINGTON — Standard & Poor’s removed the United States government from its list of risk-free borrowers for the first time on Friday night, a downgrade that is freighted with symbolic significance but carries few clear financial implications.

http://www.nytimes.com/2011/08/06/business/us-debt-downgraded-by-sp.html?_r=1&hp

From Paul Krugman

...

Check out the opinion page of any major newspaper, or listen to any news-discussion program, and you’re likely to encounter some self-proclaimed centrist declaring that there are no short-run fixes for our economic difficulties, that the responsible thing is to focus on long-run solutions and, in particular, on “entitlement reform” — that is, cuts in Social Security and Medicare. And when you do encounter such a person, you should be aware that people like that are a major reason we’re in so much trouble.

For the fact is that right now the economy desperately needs a short-run fix. When you’re bleeding profusely from an open wound, you want a doctor who binds that wound up, not a doctor who lectures you on the importance of maintaining a healthy lifestyle as you get older. When millions of willing and able workers are unemployed, and economic potential is going to waste to the tune of almost $1 trillion a year, you want policy makers who work on a fast recovery, not people who lecture you on the need for long-run fiscal sustainability.

Unfortunately, giving lectures on long-run fiscal sustainability is a fashionable Washington pastime; it’s what people who want to sound serious do to demonstrate their seriousness. So when the crisis struck and led to big budget deficits — because that’s what happens when the economy shrinks and revenue plunges — many members of our policy elite were all too eager to seize on those deficits as an excuse to change the subject from jobs to their favorite hobbyhorse. And the economy continued to bleed.

http://www.nytimes.com/2011/08/12/opinion/the-hijacked-crisis.html?src=ISMR_HP_LO_MST_FB&pagewanted=print