photo from the Los Angeles Times (link below)
The business environment is sensitive to inputs from global, economic, social, technological and competitive environments. The debt ceiling crisis that preceded the August 2, 2011 deadline created uncertainty in the global and economic arenas. During early July, 2011, business leaders, for the most part, stayed out of the conversation, trusting that the political process would find a resolution. But as the deadline approached, business leaders weighed in with one opinion in common: Solve this crisis! Businesses cannot thrive without stability.
In the LA Times article, "Debt-ceiling threat has Wall Street scrambling," several business leaders voice strong opinions:
- "No one … could possibly say that there is no chance of a catastrophic outcome," JPMorgan Chase & Co. CEO Jamie Dimon told analysts last week.
- Citigroup analysts say the odds are 50-50 that the U.S. will be demoted to an AA rating for the first time ever.
- One of the leading names on Wall Street, money manager BlackRock Inc., recruited leaders of other investment firms and large pension funds to send a joint letter to President Obama and congressional leaders asking them "to act with unity of purpose and spirit of commitment — and to act now."
The government of the United States is a huge business itself, and the businesses and citizens who live and work here rely on its financial stability.
Follow up:
When you read this post, the resolution to the debt ceiling crisis may have been achieved, and a solution may be at least partially implemented. Nevertheless, resolution of this particular issue will not resolve all of the financial problems that face the United States over the next decade. The trickle-down effect of the economic policies will continue to affect business and individuals. Think about these questions:
1. Have you borrowed money for your education, to buy a car, or for a business venture? What were the constraints on the amount you could borrow? What plans were put in place to pay the money back?
2. Investments in government bonds, which fund the borrowing that is being limited here, are sometimes viewed as "conservative" investments. This means that they do not have the possibilities of big gains, as some stock investments, and they also do not have the same risks. Do you think this debt crisis will effect the willingness of other countries and US investors to loan money to the U.S. government by buying U.S. bonds? Will investors expect higher interest rates of return? Why or why not?
3. How do you think the debt ceiling issue will impact your life over the next few years or long-term?