US may face huge financial calamity, says Fed chief

Fazle Rashid

NEW YORK, July 14: Another important voice -- that of the US Federal Reserve Bank Chairman Ben Bernake -- has been added to support the grim forecast earlier made by the US Treasury Secretary Tim Geithner. It also lent credence to Moody's rating agency's dismal warning that the US economy could plunge into catastrophe if the debt ceiling is not revised upward.

The Fed chairman told the Congress yesterday that the US would face "huge financial calamity", if the debt ceiling is not revised upward.

The bipartisan dialogue aimed at a breakthrough ended abruptly last Wednesday with President Obama walking out of the meeting in utter disgust. The stakes are high for the economy, the financial markets and both the parties, the New York Times (NYT) in a front page story said today

Ben Bernanke appearing before House Financial Committee said a recession on the scale of 2008 cannot be ruled out.

The Fed chairman in his testimony "outlined extra stimulus options the Fed could use if the economy remains weak". He warned of the possibility of the deflationary risk reemerging.

Fed options include keeping interests close to zero and buying assests.

While the US and Europe are struggling with their economies, the Chinese economy, the second largest in the world, grew by a whopping 9.5 per cent in the second quarter.

Policy managers in China are very careful about inflation not going out of hand. The weakening of the Chinese economy, key engine of global growth, could add to US and Europe's woes.

Japan's economy, the third largest in the world, is also in tatters after it was hit by the fury of nature, said an analyst

Tackling inflation is the top priority of China. Prime Minister Wen Jiabao has repeatedly stressed the importance of keeping inflation under control. China is making determined effort to raise the supply of food.

On the political front, fund raising for campaigning is a strong indicator of public support in the US.

In this count, President Obama is far ahead of his Republican contenders. A record number of eight candidates from the Republican Party have joined the fray of 2012 presidential race.

Obama camp has raised over $86 million in last three months far outpacing the combined total of the Republican candidates.

President Obama "beat all his potential rivals in the poll, driven mainly by strong support among women". H has received more funds from the grassroot levels rather than from wealthier segment of his supporters

Ms. Michele Bachmann, Tea Party favourite who recently joined the race for the White House, ranked second behind Mitt Romney, the former Massachusetts governor in the poll of Republican hopefuls.

View the original article here