Federal Debt Ceiling – The Current Issue Of The U.S.

Federal Debt Ceiling

The shortest definition of the federal debt ceiling situation of the United States (currently estimated at over 16,700 billion) is that the country is spending more that is collecting and each year it finds itself in the same situation, of spending more and more than it is managing to take in by taxes. To find its way out of this situation, the government is issuing bonds which are purchased by investors around the world, mainly by China and Japan. Why should everybody care about the federal debt ceiling? Because it will eventually affect the citizens. Fields like the medicine, education or army will have to suffer payment delays or even restructuring in order to adjust the government’s budget to the society’s costs. Even if the debt ceiling will be increased, on the long term, the same consequences remain. If not, the whole world will be rocked by the imediatele consequences. In any case, expectations point towards an extension of the agony and passing the responsabilities to the next government.

Currently the Congress and President Barak Obama are debating over the debt ceiling as 17th of October represents the next deadline. One of the House’s latest decisions was the 1 year postponement of the national healthcare law known as “Obamacare” which is considered by the Republicans as a cost that came at the wrong time. The American government being unable to pay its debts represents a scenario that nobody imagined before and no one has a clear solution for this problem. The debt ceiling must absolutely be raised, in the opinion of U.S.’s President.

In an attempt to calm the situation, as the 1 of October announces the beginning of a new fiscal year, the House unanimously approved a bill to keep paying U.S. soldiers in case the government runs out of money. The Congress seems to react with a great delay and there isn’t a clear exist strategy put in place. The world is currently waiting for another round of votes in order to have a decision on the table and the responsibility is on the Congress’s back.


Silk Road Out, Bitcoin Down 20%

Ross Ulbricht, 29, was arrested today by the FBI, as the head of the Silk Road. The website was an anonymous Internet marketplace known for illegal buying of drugs and phony identification documents. Silk Road was active from January 2011 to September 2013. Its users and transactions should have been untraceable and for this the payment on the website was done with Bitcoins. The digital currency is anonymous and can be easily turned into real money.

When the FBI held Ross they also have seized 26,000 Bitcoins that worth around $3.2 million. Right after the announcement the price of this currency dropped 20% , from 136$ to 110$.

But why did Bitcoin dropped? Silk Road was one big website that used Bitcoins, as payment, so the clients had to buy the digital currency. Buying it meant demand so the price was held at an equilibrium price. Because the site is now gone, the demand dropped instantly so the price plunged. But it wasn’t enough to keep the price too low. It climbed back to 127.50$ at this point.

Other websites that are using Bitcoins for payment: BitcoinShop, ThinkPenguin Inc, bitvapors, Private Internet Access, BitRoad, SomethingGeeky.

If you remember our last analysis, Bitcoin (BTCUSD) Consolidated in a Symmetrical Triangle? We were then saying that the price was consolidating in a triangle and a breakout out of it could tell us more about the direction. It broke under the lower line of the pattern, but the price touched the price’s target only several hours ago after the Silk Road went offline.

Chart: BTCUSD, H4

The price might oscillate now between 110$ and 140$ for the next period. Taking into consideration the price action we should keep an eye for either a drop under the current support level or a daily close above 150$ per Bitcoin to have a better idea on the future direction.