Forex - USD/JPY falls in U.S. afternoon trade

Forexpros - The Japanese yen advanced against the U.S. dollar Friday, as recent yen-weakening moves by the Bank of Japan failed to reverse a wider trend of upward momentum in the Japanese currency.

In early Asian trade USD/JPY hit 79.41, the pair's highest since July 14; the pair subsequently consolidated at 78.40, falling 0.6%.

The pair was likely to find support at 77.01, Thursday's low, and resistance at 79.41, the day's high.

Japanese finance officials have attempted to talk down the local currency, noting that the March 11 earthquake and its negative effects on the economy during the period, don't warrant investor's continued bullish moves on the yen.

Japan's Nikkei Shimbun daily reported that the August 4 intervention by the Bank of Japan to weaken the yen against its counterparts had cost the BOJ USD50 billion.

Currency analysts expected the BOJ gesture to offer only a short-term weakness in the yen in light of an overall positive sentiment on the Japanese currency.

Japan's Finance Minister Yoshihiko Noda speaking in Tokyo Friday about the BOJ intervention said, "We intervened to restrain speculative and disorderly movements, it wasn't targeted at a level."

The European Central Bank, earlier in the day, said it was prepared to purchase Italian bonds in return for promises of further financial reforms from Italy, sending the yen lower against its European counterparts.

The yen surrendered ground to both the euro and the British pound with EUR/JPY up 0.67% to hit 111.91, and GBP/JPY rising 0.02% to hit 128.21.

The market was expected to focus on next week's Federal Reserve decision on short-term interest rates for possible changes in U.S. monetary policy.

Market News Headlines

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Read more: http://www.nasdaq.com/aspx/market-headlines.aspx#ixzz1UHIbRVPy

UPDATE: US Factory Orders In June Drop For Second Time In 3 Months

(Adding non-manufacturing ISM number, ADP data; inserting analyst comment)

--Factory goods orders fall in June by 0.8% from previous month

--Gauge of capital spending increases modestly

--Report underscores weakness of overall economy

By Jeff Bater and Tom Barkley

Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- Orders for U.S. factory goods fell in June for the second time in three months, a sign the anemic economy is causing strains among manufacturers.

Orders for manufactured goods decreased by 0.8% from the prior month to $ 440.69 billion, the Commerce Department said Wednesday.

Aside from the drop in factory orders, an important reading on the nation's service sector fell to its lowest since February 2010. The Institute for Supply Management said Wednesday its non-manufacturing purchasing managers' index slipped to 52.7 in July from 53.3 in June.

Payroll giant Automatic Data Processing Inc. and consultancy Macroeconomic Advisers said private-sector payrolls increased in July, but their somewhat upbeat report didn't show a jobs gain considered robust or particularly healthy.

Despite a deal in Washington to raise the government debt ceiling and avoid default, stock market prices Wednesday were down, reflecting deepening worry about the overall economy.

"Good economic reports have been few and far between and the slowdown is real, " said Joel Naroff, who runs Naroff Economic Advisors in Holland, Pa. "I don't expect a double-dip, but this economy doesn't need any more speed bumps put in the road."

Overall economic growth was soft in the first half of 2011, as consumers pulled back sharply on their spending. Unemployment in the U.S. is high, and elevated gasoline prices mean consumers have to fork over more of their incomes, which aren't rising much.

The decline in factory orders during June follows a 0.6% increase in May and a drop of 0.9% during April. Economists surveyed by Dow Jones Newswires had forecast a 1.0% drop in overall factory orders in June.

Capital investment on equipment by U.S. businesses rose mildly. A barometer of business spending within the data, non-defense capital goods orders excluding aircraft, increased by 0.4%.

Manufacturing has been a strong part of the economy as it recovers from the recession. But factories have been feeling stress from a slowing economy.

Last week, the government reported orders for long-lasting goods tumbled a second time in three months during June. On Wednesday, the Commerce Department, in its factory report, revised the durable-goods orders drop, to 1.9% from the previously estimated 2.1%.

A report this week suggested manufacturing slowed sharply in July. The ISM's manufacturing index fell to 50.9 from 55.3 in June. The new reading wasn't much above 50, the minimum level that indicates expanding activity in the goods- making sector. Readings below 50 suggest contraction.

-By Jeff Bater, Dow Jones Newswires; 202-862-9249, jeff.bater@dowjones.com

2nd UPDATE: Kinder Morgan Energy Partners Plans 2-Part $750 Million Offering

Kinder Morgan Energy Partners selling $750 million offering in 10.5- and 30- year notes

--Proceeds will be used to repay short-term debt and for general corporate purposes

--The company last issued debt in February with a $1.1 billion deal

(Updates with launch levels in second paragraph and final risk premiums in third paragraph.)

By Nicole Hong

Of DOW JONES NEWSWIRES

NEW YORK -(Dow Jones)- Kinder Morgan Energy Partners LP (KMP), a subsidiary of energy company Kinder Morgan Inc. (KMI), is planning to issue a two-part $750 million bond offering Wednesday in the U.S. market, according to a person familiar with the deal.

The deal comprises a $375 million 10.5-year tranche and a $375 million 30-year tranche.

The 10.5-year piece launched at the narrow end of price guidance, suggesting good demand, with a risk premium of 157 basis points over Treasurys. The 30-year piece launched with a risk premium of 180 basis points over Treasurys, directly in line with price guidance.

Pricing on the senior unsecured notes is expected later Wednesday.

Leading the debt sale are Bank of America Merrill Lynch, Barclays Capital and Citigroup Inc. (C).

Proceeds will be used to repay short-term debt and for general corporate purposes.

The deal has been rated Baa2 by Moody's Investors Service and BBB by Standard & Poor's.

Kinder Morgan Energy Partners last issued debt in February with a $1.1 billion deal, according to data provider Dealogic.

Headquartered in Houston, Kinder Morgan Energy Partners is a pipeline transportation and energy-storage company in North America. Two weeks ago, it reported quarterly earnings dropped 36% to $230.5 million from $361.2 million a year earlier.

Kinder Morgan declined to comment on the deal.

-By Nicole Hong, Dow Jones Newswires; 212-416-3760; nicole.hong@dowjones.com

3rd UPDATE: Coca-Cola To Offer $2 Billion In Notes To Fund Exchange Offer

Adds launch levels in fifth paragraph.)

DOW JONES NEWSWIRES

Coca-Cola Co. (KO) said it plans to offer $2 billion of senior notes as the beverage company aims to raise proceeds to fund an exchange offer of several series of notes.

The company intends to sell $1 billion of notes due in 2016 and another $1 billion to mature in 2021, saying the proceeds would be used to fund an exchange offer of up to $2 billion of notes issued by a subsidiary, Coca-Cola Refreshments USA Inc.

The maturity dates of the exchange offer vary from as early as 2012 to as late as 2036. The early participation payment per $1,000 principal amount of old notes accepted for exchange was generally set at $40, although it was $10 for two series of notes due in 2012.

The exchange offer expires at midnight EDT on Aug. 30, unless otherwise extended. A number of companies are using the record-low interest-rate environment to cut borrowing costs, although Coca-Cola didn't detail why it was launching the offer.

Both tranches launched at the narrow end of price guidance, suggesting good demand. The five-year notes launched with a risk premium of 57 basis points over Treasurys and the 10-year notes with a risk premium of 72 basis points over Treasurys.

Pricing is expected later Wednesday.

Leading the debt sale are BNP Paribas SA (BNPQY, BNP.FR), Citigroup Inc. (C) and Goldman Sachs Group Inc. (GS).

This is the first time Coca-Cola has issued debt this year, according to data provider Dealogic. The company's last debt offering was for $4.5 billion in November 2010.

The deal has been rated Aa3 by Moody's Investors Service and A+ by Standard & Poor's.

Last month, Coca-Cola reported its second-quarter earnings rose 18%, boosted by the company's recent bottler acquisition and strong volume growth overseas. But results were muted closer to home due to the struggling economy.

Shares were up 1.4% to $68 in recent trading.

-By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com

--Nicole Hong contributed to this article.

FDA Says High Doses Of Antifungal Drug Fluconazole Might Cause Birth Defects

By Jennifer Corbett Dooren, Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- The U.S. Food and Drug Administration said Wednesday long-term treatment with high doses of the antifungal drug fluconazole in the first trimester of pregnancy might cause birth defects.

Fluconazole is marketed by several generic drug companies and under the brand name Diflucan by Pfizer Inc. (PFE). The product is used to treat certain kinds of yeast infections and meningitis caused by a type of fungus. Fluconazole is also used to prevent yeast infections in patients being treated with chemotherapy or radiation before a bone-marrow transplant.

The FDA said that the typical one-time, 150 milligram dose used to treat vaginal yeast infections is not associated with a risk of birth defects.

However, there have been at least five reported cases of birth defects, that include facial abnormalities, seen in infants whose mothers were treated with 400-to-800 milligrams of fluconazole per day during the first trimester of pregnancy.

The agency changed the pregnancy category for most uses of fluconazole to " pregnancy category D" which means there's evidence of fetal risk based on human data, but the potential benefits from use of the drug in pregnant women with serious or life-threatening conditions may be acceptable, according to FDA.

A pregnancy category appears on drug labels written for health-care professionals. The agency said the category wasn't being changed for the 150 milligram dose used to treat vaginal yeast infections.

-By Jennifer Corbett Dooren, Dow Jones Newswires; 202-862-9294; jennifer.corbett@dowjones.com

2nd UPDATE: KKR 2Q Core Earnings Down 25% As Gains Moderate

--Shares fall as earnings miss analysts' expectations

--Its earnings miss highlights volatile marked-to-market values

--Choppy market may continue to hurt earnings

--Market volatility will accelerate investors' shift to alternative investments

(Adds share price in the first two paragraphs, details to financials in the fifth and sixth paragraph, comments from earnings call from ninth paragraph onwards.)

By Amy Or

Of DOW JONES NEWSWIRES

KKR & Co.'s (KKR) share price dropped nearly 6% as its second-quarter core earnings fell 25% and missed analysts' expectations.

Its shares were down 5.9% at $13.30 in recent trading.

Economic net income--a metric analysts monitor that reflects private-equity firms' underlying operations and excludes special charges such as those linked to KKR's initial public offering--fell to 36 cents a share from 48 cents. Analysts polled by Thomson Reuters had expected earnings of 40 cents a share on revenue of $195 million.

Profits calculated on generally accepted accounted principles rose 32% to $ 39.6 million on higher assets under management and a 35% rise in revenue to $ 117.6 million.

KKR's earnings miss highlights volatilities in reporting marked-to-market values of portfolios at a time when markets have steadied following the huge plunge and rebound of the financial crisis.

Gains from KKR's investments in underlying funds and co-investments fell to $ 150 million from a $255 million a year ago on "less significant appreciation" in assets than in the year-earlier period, thus hurting economic net income.

Its private-equity portfolio appreciated by 3.8% in the second quarter and 10.1% in the first half, coming off the extremely high returns of more than 30% last year.

"Our private equity investments outperformed the S&P 500 by nearly 400 basis points for the quarter," said Henry R. Kravis and George R. Roberts, co- founders, co-chairmen, and co-chief executives in a statement.

But recent market volatilities may spell further woes in upcoming earnings, as share prices of publicly listed portfolio companies take a hit.

During a conference call to discuss the results, executives said hospital operator HCA Holdings Inc.'s (HCA) 30% plunge in share price since the end of the second quarter, if booked on the balance sheet right now, would be reflected as a loss of around $150 million in fair value and $69 million in performance fee or "carry."

"HCA is still well over three times its cost," said Craig Larson, KKR's head of investor relations.

But overall, KKR said it expects to benefit from choppy market conditions as institutional investors switch to alternative investments from traditional means of trading.

"Maybe it's counterintuitive. But when everybody's scared, we get pretty excited," said Scott Nuttall, KKR's head of global capital and asset management. "This environment is creating some pretty interesting supply-demand imbalances and we're stepping into that imbalance and making some pretty investments."

He highlighted opportunities in European banks' sales of assets and lending to middle-market companies, where banks and traditional sources of financing are " gone or impaired."

The company, which switched the listing of its shares to the New York Stock Exchange in July 2010 from Euronext Amsterdam, had $61.9 billion in assets under management as of June 30, up 14% from a year ago, on continued investment appreciation and new capital raised.

Since March 31, KKR disclosed 12 new investments whose enterprise value totaled $11 billion.

It also reported seven sales of companies, expected to realize more than $2 billion, or 2.4 times its initial investments. Executives said an announced sale of Hilcorp Resources Holdings LP is expected to generate a cash distribution of 6 cents a share in the fourth quarter.

KKR, which still has $13.7 billion in uncalled commitments or "dry powder" for future investments, said its new long-short equity hedge fund started to accept investors' capital this month. The team is run by former Goldman Sachs Group Inc. (GS) proprietary traders.

-By Amy Or, Dow Jones Newswires; 212-416-3142; amy.or@dowjones.com

--Nathalie Tadena contributed to this article.

Top 10 Companies With More Cash Than The U.S. Government

(List compiled by Andrew Dominguez. Data sourced from Screener.co. Disclosure: Andrew Dominguez owns GE shares.)

In some senses, paying taxes is like buying shares of a company – taxes are an investment in the wellbeing of a country and its citizens. It can also provide a sense of ownership and involvement in the state of the government and society.

By the same token, one would hope that the government is trying to maximize value for its shareholders – its tax-paying and tax-exempt citizenry. This might include constantly improving roads, fire and police departments, education, pensions, and a whole host of other services. This is why the recent debt ceiling debacle has been particularly frustrating for this author.

The decision to cut budgets without raising taxes seems to imply that our elected officials would rather bail on its obligations to their most vulnerable constituents – those that rely on public education and transportation for their livelihoods; the retired; the poor and huddled masses – instead of asking the most fortunate members of the populace to lend a helping hand.

Arguing that low marginal tax rates are essential to spur growth overlook the fact that the remarkable growth in the 1960s, still considered a benchmark for potential GDP, occurred in spite of a 91 percent income tax on the highest earners.

By pandering to the strongest members of society and abandoning the weakest, the American government may have squandered the American dream – the idea that meritocracy and liberalism could afford social and economic mobility to all of America’s citizens; a belief in a city upon a hill, shining like a beacon for the rest of the world to behold in wonder, like Lady Liberty herself.

Instead, the government is near broke. According to the Treasury department, the total amount of taxpayers’ money left in the coffers amounts to little more than $67bn, around half of what was available as recently as mid-July.

A number of companies have handled their shareholders’ money much more responsibly than the American government. Here is a list of the ten companies that have more cash at their disposal than Uncle Sam does.

Analyze These Ideas (Tools Will Open In A New Window)

1. Access a thorough description of all companies mentioned
2. Compare analyst ratings for all stocks mentioned below
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List sorted by cash and equivalents in the most recent quarter.

Note: Because many of the companies listed below are foreign/ADR stocks, there could be a mismatch between market cap and cash & equivalents figures. Cash & equivalents reflect all of the cash held by the company, globally. Market cap might only reflect the total value of shares listed in American exchanges, which would not include the value of shares listed in other countries.

1. Banco Bilbao Vizcaya Argentaria SA (BBVA): Money Center Banks industry with a market cap of $47.96B. Cash and Equivalents at $512.07B. It is a diversified international financial group, with strengths in the traditional banking businesses of retail banking, asset management, private banking and wholesale banking. It also has investments in some of Spain’s companies. During the year ended December 31, 2009, BBVA focused its operations on six major business areas: Spain and Portugal, Wholesale Banking and Asset Management, Mexico, The United States, South America and Corporate Activities.

2. UBS AG (UBS): Investment Services industry with a market cap of $62.41B. Cash and Equivalents at $165.15B. It offers a combination of wealth management, asset management and investment banking services on a global and regional basis. As of December 31, 2009, it operated about 973 business and banking locations worldwide, of which about 42% were in Switzerland, 41% in the Americas, 12% in the rest of Europe, Middle East and Africa, and 5% in Asia-Pacific.

3. Barclays PLC (BCS): Money Center Banks industry with a market cap of $43.75B. Cash and Equivalents at $160.26B. It is engaged in retail banking, credit cards, corporate and investment banking and wealth management. It operates through branches, offices and subsidiaries in the United Kingdom and overseas.

4. General Electric Company (GE): Conglomerates industry with a market cap of $190.49B. Cash and Equivalents at $136.4B. It is a diversified technology and financial services corporation. Its products and services range from aircraft engines, power generation, water processing, and household appliances to medical imaging, business and consumer financing and industrial products. Its segments include Energy Infrastructure, Technology Infrastructure, NBC Universal, GE Capital and Home & Business Solutions.

5. Banco Santander, S.A. (STD): Regional Banks industry with a market cap of $85.06B. Cash and Equivalents at $123.59B. It operates principally in Spain, the United Kingdom, Portugal, other European countries, Brazil and other Latin American countries and the United States, offering a range of financial products. It operates in four segments: Continental Europe, United Kingdom, Latin America and Sovereign.

6. Bank of America Corporation (BAC): Money Center Banks industry with a market cap of $99.59B. Cash and Equivalents at $119.53B. It serves individual consumers, small and middle market businesses, corporations and governments with a range of banking, investing, asset management and other financial and risk management products and services. It provides a range of banking and non-banking financial services and products through six business segments: Deposits, Global Card Services, Home Loans & Insurance, Global Commercial Banking, Global Banking & Markets (GBAM) and Global Wealth & Investment Management (GWIM), with the remaining operations recorded in All Other.

7. Royal Bank of Scotland Group PLC (RBS): Money Center Banks industry with a market cap of $33.45B. Cash and Equivalents at $97.82B. It operates in the United Kingdom, the United States, and internationally through its two principal subsidiaries, The Royal Bank of Scotland plc and National Westminster Bank Plc. Its business segments include: UK Retail, UK Corporate, Wealth, Global Banking and Markets (GBM), Global Transaction Services, Ulster Bank, US Retail and Commercial and RBS Insurance.

8. Lloyds TSB Group PLC (LYG): Money Center Banks industry with a market cap of $47.25B. Cash and Equivalents at $88.94B. It provides a range of banking and financial services, primarily in the United Kingdom, to personal and corporate customers. Its main business activities are retail, commercial and corporate banking, general insurance, and life, pensions and investment provision. It also operates an international banking business with a global footprint in over 30 countries.

9. Credit Suisse Group AG (CS): Investment Services industry with a market cap of $42.34B. Cash and Equivalents at $87.16B. It provides advisory services, solutions and products to companies, institutional clients and private clients globally, as well as to the retail clients in Switzerland. It operates in three business segments: Private Banking, Investment Banking and Asset Management.

10. HSBC Holdings PLC (HBC): Regional Banks industry with a market cap of $177.94B. Cash and Equivalents at $71.75B. It is a global banking and financial services organizations. As of December 31, 2010, it provided a range of financial services to around 95 million customers through two customer groups, Personal Financial Services (PFS), including consumer finance, and Commercial Banking (CMB), and two global businesses, Global Banking and Markets (GB&M), and Global Private Banking (GPB). As of December 31, 2010, the Company had an international network of some 7,500 offices in 87 countries and territories in six geographical regions; Europe, Hong Kong, Rest of Asia-Pacific, the Middle East, North America and Latin America.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Market News Headlines 2/8/2011

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Read more: http://www.nasdaq.com/aspx/market-headlines.aspx#ixzz1U0QWlLSG

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x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x For a new investor, the stock market can feel a lot like legalized gambling. "Ladies and gentlemen, place your bets! Randomly choose a stock based on gut instinct and water cooler chatter! If the price of your stock goes up -- and who knows why? -- you win! If it drops, you lose!" Isn't that why so many people got rich during the dot-com boom -- and why so many people lost their shirts (not to mention their retirement savings) in the recent recession?

Not exactly. But unfortunately, that's how many new investors think of the stock market -- as a short-term investment vehicle that either brings huge monetary gains or devastating losses. With that attitude, the stock market is as reliable a form of investment as a game of roulette. But the more you learn about stocks, and the more you understand the true nature of stock market investment, the better and smarter you'll manage your money.

The stock market can be intimidating, but a little information can help ease your fears. Let's start with some basic definitions. A share of stock is literally a share in the ownership of a company. When you buy a share of stock, you're entitled to a small fraction of the assets and earnings of that company. Assets include everything the company owns (buildings, equipment, trademarks), and earnings are all of the money the company brings in from selling its products and services.

Why would a company want to share its assets and earnings with the general public? Because it needs the money, of course. Companies only have two ways to raise money to cover start-up costs or expand the business: It can either borrow money (a process known as debt financing) or sell stock (also known as equity financing).

The disadvantage of borrowing money is that the company has to pay back the loan with interest. By selling stock, however, the company gets money with fewer strings attached. There is no interest to pay and no requirement to even pay the money back at all. Even better, equity financing distributes the risk of doing business among a large pool of investors (stockholders). If the company fails, the founders don't lose all of their money; they lose several thousand smaller chunks of other people's money.

Perhaps the best way to explain how stocks and the stock market work is to use an example. For the remainder of this article, we'll use a hypothetical pizza business to help explain the basic principles behind issuing and buying stock. We'll start on the next page with the reasons why a restaurant owner would issue stock to the public.

GLOBAL MARKETS-U.S. deal offers respite, but downgrade looms

Riskier assets rally after tentative U.S. debt deal

* Wall Street set for gains

* Gold weaker but Swiss franc gains vs dollar

* U.S. credit downgrade expected

* PMIs show stagnant growth


By Jeremy Gaunt, European Investment Correspondent

LONDON, Aug 1 (Reuters) - Investors boosted stocks and sold some safe-haven assets on Monday, betting that a last-minute deal in Washington meant the U.S. economy would avoid default.

Wall Street looked set for significant gains but caution was the watchword, with the dollar falling to a new record low against the Swiss franc.

There remained a widespread assumption that ratings agencies could downgrade U.S. Treasuries from their vaunted triple-A status, a move that would impact the valuation of numerous other assets.

Investors were also digesting data pointing to stagnant growth in the global economy, with Chinese factory activity slowing and euro zone manufacturing falling.

After a tense weekend spent in search of a compromise to allow the U.S. borrowing limit to be lifted, U.S. President Barack Obama said leaders from both parties reached a deal to cut the budget deficit by $1 trillion over 10 years, with additional savings of $1.4 trillion possible.

The plan must be passed by both houses of Congress and will still face some opposition. But it is expected to allow the debt ceiling to be raised, avoiding the prospect of Washington not being able to pay its bills and defaulting.

World stocks as measured by MSCI climbed 0.7 percent with emerging market shares up 1.3 percent.

There were large gains in Japan, where the Nikkei rose 1.3 percent. In Europe, the FTSEurofirst 300 rose 0.5 percent with banking shares enjoying a big boost.

But scepticism persisted about how long the rise in risk sentiment might last, given the likely U.S. downgrade that some believe could come this week.

"It is a relief rally on the back of the parties coming together, but it could only last for a couple of days as the United States could now face a ratings downgrade," Manoj Ladwa, senior trader at ETX Capital, said.

"That would impact every part of the United States."

It would also raise issues for other assets. Some large pension funds, for example, will only hold triple-A debt, meaning they may have to sell Treasuries and buy elsewhere, crowding trades into German Bunds, for example.

The relative valuations of a number of assets, meanwhile, are based on their divergence from supposedly risk-free Treasuries.


UNWINDING

An unwinding of investor positions taken to protect against U.S. default was short-lived.

Gold fell more than 1 percent before recovering to stand just half a percent down. It was at $1,618 an ounce after hitting all-time nominal highs last week.

Early dollar gains against the Swiss franc reversed, leaving the U.S. currency at a new record low. The franc has seen intense interest from investors as the twin euro zone and U.S. debt crises have stirred markets this year.

"The problems are not fully solved so I think we will see a muted reaction," said Richard Falkenhall, currency strategist at SEB in Stockholm.

"You have the risk of ratings agency downgrades, and no further fiscal stimulus in this deal," he said.

On bond markets, yields on U.S. Treasuries and core euro zone debt rose, reflecting some selling to release money parked in fixed income in the runup to the U.S. deal.

(Additional reporting by Naomi Tajitsu and Joanne Frearson; Editing by John Stonestreet/Catherine Evans)

Putin says U.S. is "parasite" on global economy

(Reuters) - Russian Prime Minister Vladimir Putin accused the United States Monday of living beyond its means "like a parasite" on the global economy and said dollar dominance was a threat to the financial markets.

"They are living beyond their means and shifting a part of the weight of their problems to the world economy," Putin told the pro-Kremlin youth group Nashi while touring its lakeside summer camp some five hours drive north of Moscow.

Russian Prime Minister Vladimir Putin answers questions from the audience during his visit to the summer camp of the pro-Kremlin youth group ''Nashi'' at lake Seliger, some 400km (248miles) north of Moscow, August 1, 2011.

Credit: Reuters/Mikhail Metzel/Pool

By Maria Tsvetkova

"They are living like parasites off the global economy and their monopoly of the dollar," Putin said at the open-air meeting with admiring young Russians in what looked like early campaigning before parliamentary and presidential polls.
US President Barack Obama earlier announced a last-ditch deal to cut about $2.4 trillion from the U.S. deficit over a decade, avoid a crushing debt default and stave off the risk that the nation's AAA credit rating would be downgraded.
The deal initially soothed anxieties and led Russian stocks to jump to three-month highs, but jitters remained over the possibility of a credit downgrade.
"Thank god," Putin said, "that they had enough common sense and responsibility to make a balanced decision."
But Putin, who has often criticized the United States' foreign exchange policy, noted that Russia holds a large amount of U.S. bonds and treasuries.
"If over there (in America) there is a systemic malfunction,
this will affect everyone," Putin told the young Russians.
"Countries like Russia and China hold a significant part of their reserves in American securities ... There should be other reserve currencies."
U.S.-Russian ties soured during Putin's 2000-2008 presidency but have warmed significantly since his protégé and successor President Dmitry Medvedev responded to Obama's stated desire for a "reset" in bilateral relations.
EARLY CAMPAIGNING?
Casually dressed in khaki trousers and a striped white shirt, Putin flew by helicopter to the tented camp as part of a string of appearances that are being closely watched in the run-up to the elections.
He did not say whether he plans a return to the Kremlin or will stand aside for Medvedev, his partner in Russia's leadership tandem, to run for a second term.
But young people crowding round Putin, caught up in the campaigning spirit created by huge portraits of Putin hung from trees, were not shy about saying who they wanted as president.
"Russia's next president will be small, bald and look like Putin," 17-year-old Ilya Mzokov joked with reporters. Asked why Medvedev was not paying a visit to the summer camp, he said: "Only serious people come here."
Youngsters chanted Putin's name and applauded his remarks as he strolled round the camp, where US-style business seminars, extreme sports and political mudslinging were among the topics on offer.

Putin, whose macho image appeals to many Russians, briefly swung himself up the first half of a climbing wall, filmed by a gaggle of state television cameras.

Nashi, which means "Our People," was created by the Kremlin to counter popular dissent after youth activism helped topple a pro-Moscow government in Ukraine's 2005 Orange revolution.
The group has worked to spread a personality cult around Putin and regularly campaigns against Kremlin critics.
Opinion polls show Putin, still widely viewed as the country's paramount leader, retains near 70 percent approval.
But his United Russia party is trying to reverse a slide in popularity before December parliamentary polls, hoping to use a strong showing there to help Putin in the March 2012 presidential vote.
(Writing by Alissa de Carbonnel; editing by Tim Pearce

Ramadan Blog Becomes Book on Benefits of Fasting

Poet and essayist Kazim Ali examines the beauty of the religious ritual
The Quran calls on Muslims to refrain from eating, drinking, smoking and sexual intercourse during the daylight hours for the entire month.
Muslims are also expected to abstain from eavesdropping, gossip and backbiting while spending time reflecting on God and their faith.

In his book "Fasting for Ramadan," poet and essayist Kazim Ali examines the beauty this ancient practice brings to his life and the relevance it may have for Muslims and non-Muslims alike.
Born in London, Kazim Ali was raised in Canada by his Shi'ite Muslim parents and now teaches writing at Oberlin College in Ohio.

His relatives consider themselves to be traditional and many of them married women who cover their heads. But Ali and his mother were usually the only ones fasting during Ramadan.

He recalls his mother's tap on the door in the dark before dawn when they would share a meal before the sun rose and the fast began.


"It was our special time," he says. "There weren’t other people there. And then throughout the day we would be walking around through our lives, and everyone else was there but that other person was in that same condition as you, so they know what it’s like. And when it comes time for the end of the day, I would sit there and watch her eat. Normally you break your fast with dates and warm water. And she would take a bit of the date and I wanted to see that moment, you know. And it was special.”

Once he left for college, Ali began to find the traditional interpretations of the Quran to be confining and he stopped fasting.
However, as he grew older, he read the Quran with fresh eyes and noticed contradictions that delighted him.

He was also intrigued by a sentence that frequently follows stories in the holy book, such as the accounts of God’s creation of the universe, and His desire for harmony among His creatures. The sentence reads, “there are signs in this for those who reflect upon it.”

“This means, in a way, to be in a constant state of doubt because you are always going to think about ‘What does this mean?’ and ‘What does that mean?’ ‘How does this affect my life?’" he says. "That’s a beautiful, pluralistic form of Islam that I think is very exciting and dynamic.”

Ali took up fasting again. In 2007, he kept a daily journal about his Ramadan experiences and, in 2009, he published a daily blog about it.

He combined the two accounts for his book “Fasting for Ramadan: Notes from A Spiritual Practice.” In it, he says the first hours of each fast are the toughest. Then hunger diminishes.

“It kind of flattens itself out and you pull in a little bit and you just become a little more pensive," says Ali. "In fact, you almost forget about food. I get quieter. I start to realize that it takes energy to be angry or to be excitable, even positively about something. And it takes caloric energy to speak. It actually is taking me caloric energy to think, shockingly."

Ali has integrated yoga into his Ramadan experience. He feels it is useful when the spiritual calm he experiences during the daytime gives way to the emotions and moods he often feels after breaking the fast.

Here is an excerpt from Day Four of his Ramadan journal:

“My yoga study reminds me that the ‘moods’ of the self are not the self that abides. I think there is a self that abides. Like in classical Indian music: there is a plucked melody, but also a drone in the background, a constant note."

Ali stresses that fasting is physical and spiritual, not intellectual.

“Even if you are not thinking that much about it, something is still happening in the cells of your body," he says. "And if it’s happening in the cells of your body, it is also happening to your brain and your mind which are, after all, a part of your physical makeup. So 30 days of fasting will transform you whether or not you intellectualize it in any way.”

The holy month is considered a social equalizer. The wealthy fast alongside the less fortunate and are also expected to donate food to the poor for the break fasts, or Iftars, at sunset. Community is key, and people are expected to break the fast with others while giving thanks to Allah.

“Maybe He is the background to all of this. We often get in trouble when we talk about who He is, what He is like and what He wants," Ali says. "Maybe we shouldn’t pay attention to those things as much as we do. We should just try to be good and kind to people. I hope people will see the benefits of fasting and think a little bit more about how much they have and how much they’ve been given."

Kazim Ali turned a daily journal about his Ramadan experiences into a blog and, now, a book published by Tupelo Press.

Tanya Rosen-Jones

Kazim Ali explores the benefits of the Islamic holy month in his book, 'Fasting for Ramadan.'

Officials: Israeli PM Ready to Negotiate Borders

Israeli officials say Prime Minister Benjamin Netanyahu has agreed to negotiate the borders of a future Palestinian state using the 1967 cease-fire line that delineates the West Bank as a starting point for talks.

Sources in the prime minister's office revealed the dramatic policy shift to Israeli media outlets late Monday. They said that in order to restart direct peace negotiations with the Palestinians, Mr. Netanyahu would be willing to discuss a proposal containing a formula on borders "that would be difficult for Israel to accept."

Officials said Mr. Netanyahu made clear that Israel will not return to the borders it had before the 1967 Six-Day War. They said demographic changes that have taken place since then - the expansion of Jewish settlements in the West Bank - must be taken into account.

The officials also said that in exchange for the concession, Palestinians must recognize Israel as a Jewish state and retract a unilateral application for statehood likely to be submitted to the United Nations next month.

Palestinian officials said they have not received such a proposal from Israel.

Earlier this year, U.S. President Barack Obama proposed negotiations based on the pre-1967 borders plus agreed swaps of territory between Israel and a Palestinian state.

Western-sponsored peace negotiations broke off just weeks after intensive efforts to renew them last September, in a dispute over Jewish settlement building in the West Bank.

Palestinians have demanded that Israel stop all settlement construction before peace talks resume. Mr. Netanyahu wants negotiations with no preconditions in which issues like borders and settlements would be discussed.

Most of the world considers the 1967 line to be a legitimate frontier, while Israel has always insisted it is just a temporary truce line that does not dictate the location of the border.

Earlier Monday, Israeli troops killed two Palestinian men during clashes at a refugee camp in the West Bank. Israeli officials said the soldiers shot the men at the Qalandiya camp after clashes that included young men throwing stones at the troops.

China's Xinjiang Region Hit by More Attacks

Chinese authorities say two attacks in the country's remote region of Xinjiang have left at least 19 people dead, including five attackers, and injured more than 40 others.
Chinese officials say the two incidents, which occurred late Saturday evening and then again on Sunday afternoon in the city of Kashgar, were both terrorist attacks. Authorities also said that at least one of the leaders of Sunday’s attack received terrorist training in Pakistan.
Bomb blasts
Chinese state media say the spree of violence in Xinjiang began when two bombs shook the streets of Kashgar. Authorities say an hour after the blasts on a nearby street, two attackers hijacked a truck, killed its driver, and then drove it into a crowd of pedestrians. Chinese media reported the attackers then got out of the truck and began stabbing people who were passing by.

The Kashgar city government says eight bystanders were killed in the violence, one attacker was killed and another was apprehended.

On Sunday afternoon, authorities said a bigger group of men carried out the second attack, stabbing the owner of a restaurant and a waiter and then setting it on fire. The attackers then ran out of the restaurant and began stabbing bystanders randomly, killing four and wounding 15 others. Chinese media reported four of the attackers were shot dead after leaving the restaurant and another died later at the hospital.
Uighurs accused
The Kashgar city government issued an arrest warrant for two of the attackers, who escaped, and offered a reward of more than $15,000 for any information that leads to their capture. Both are members of Xinjiang's Uighur minority group.
The city government identified the two as 29-year old Memtieli Tiliwaldi and 34-year old Turson Hasan.

The Kashgar city government says that based on a confession from one of the alleged attackers, at least one of the group's leaders who participated in Sunday's attack received firearms and explosives training in Pakistan and then later returned to Xinjiang.

The statement says the leader received training from a Pakistan-based camp of the East Turkestan Islamic Movement, a banned organization that seeks independence for Xinjiang. A spokesman with the Kashgar city government could not be reached for comment.
Ethnic tensions
Xinjiang is home to millions of Muslim Uighurs, who are angry about what they say has been decades of repressive rule by Beijing and the unwanted immigration of China's dominant Han ethnic group.

Dilxat Raxit, the spokesman for the World Uighur Congress, questioned China's account of the events and says the lack of legitimate means to voice grievances in the region may drive some to violence.
There there is no way for Uighurs to protest through peaceful means, he said, and that Beijing has to acknowledge its responsibility in what has happened in the area. From what he has heard, people in Kashgar have been forbidden from leaving their homes and authorities have detained more than 100 people, Raxit said.
Growing unrest

The two attacks wrap up what has been a violent month for Xinjiang.
Less than two weeks before the attacks in Kashgar, a group of 14 men allegedly stormed a police station. According to government accounts of the incident, 18 people were killed after the men took hostages. Fourteen of those who died were the attackers. Four remain in custody and authorities have released no additional information - such as their names or what might have possibly brought on the attack.

During that attack Chinese terrorism analysts suggested that links to terrorist groups in Pakistan could have been a factor. World Uighur Congress spokesman Raxit says that the Chinese government always tries to link such incidents to terrorism.

The Chinese government uses repressive measures against demonstrations, he said, and tries to avoid responsibility by linking every act of protest to terrorist organizations.
China denies the claims of the World Uighur Congress and in turn has accused the group of masterminding a riot in Urumqi in 2009, that left nearly 200 people dead.
Most of the casualties were members of China's Han ethnic group.

Stocks Rally on US Debt Deal, Briefly

Global Investors breathed a collective sigh of relief, following news that U.S. politicians had reached tentative agreement on raising the government's debt limit - avoiding a possible default.  Financial markets around the world reacted positively.  But, the euphoria did not last long.

In Asia, key indexes from Hong Kong to Japan were up sharply after the U.S. announcement.
Gold prices dropped more than $15, oil saw its biggest gains in two months and the dollar strengthened against the euro and the yen.

But investment analyst Martin Hennecke said the optimism was not likely to last.

"The immediate reaction is positive in the Asian markets so the markets are up," said Hennecke. "However, before one becomes overly euphoric, we would caution that increasing the debt limit means increasing the debt - and too much debt was the problem in the first place in the United States."

On Wall Street the euphoria quickly gave way to reality.  The Dow Jones Industrial Average - up nearly 150 points before the opening bell - plunged into the red again for a seventh consecutive day Monday -- after a key manufacturing index showed U.S. factory production at the slowest pace in two years.  Earlier gains in Europe also evaporated.

Societe General's Marc Lansonneur says all this talk of the U.S. debt appears to be highlighting problems closer to home.

"More issue [concerns] in U.S. debt market will increase the euro zone threat," said  Lansonneur. "Also, what's next?  I mean, you know, you have Japan, which is not in good shape from a government debt point of view, and even China.  I mean, China is also in debt in the public sector."

New economic reports show Chinese factory output fell to a three-year low last month as manufacturers grappled with credit shortages and slowing global demand.

China economic consultant Andrew Leung says the slowdown comes as the country's inflation is rising.

"China, like the rest of the world, is at a crossroads, a very, very important point in the world's development," said Leung. "And China is trying to go for a slower, but more sustainable model of growth."

Projected spending cuts contained in the U.S. debt deal could further slow growth in many export-driven economies as American consumer spending slows down.  Investors say they will be watching the latest U.S. data for clues to the state of the U.S. economy.  One of the key indicators - the Labor Department's monthly employment report - comes Friday.

US Senate Set to Vote on US Debt Ceiling Bill

The U.S. Senate will vote Tuesday on a compromise bill to cut government spending and raise the nation's borrowing limit, bringing a likely end to weeks of fear over a potential American debt default.

The Senate is expected to vote on the deal at noon local time, just 12 hours before the government says it will run out of money to pay its bills.

On Monday night, the bill passed its biggest test when the Republican-led House of Representatives approved it by a vote of 269 to 161.

U.S. Debt Deal Facts It allows the debt ceiling to rise by up to $2.4 trillion - enough to keep the country borrowing money until 2013. It includes spending cuts that could reach $2.5 trillion, to exceed the amount of the debt ceiling increase. It initally cuts spending by at least $900 billion over 10 years, and creates a bipartisan budget committee to find additional deficit reduction of at least $1.5 trillion. If the committee fails by late November to find additional ways to reduce the deficit, the failure would trigger automatic cuts across the government to take effect in 2013. Among them would be the first reduction in Defense Department spending in decades. The deal does not include the Republicans' goal of requiring a balanced-budget amendment. It also leaves out the Democrats' plan to end some tax cuts for the wealthy.

If the legislation passes the Senate Tuesday, it will be sent to President Barack Obama, who has said he is anxious to sign the bill.

The deal would allow the government to continue borrowing money through 2012 in exchange for spending cuts of almost $1 trillion over the next 10 years.

The package would also create a bipartisan budget committee tasked with finding additional cuts of $1.5 trillion. If the panel fails to reach an agreement, then the deal would trigger additional spending cuts.

Although party leaders say they expect the deal to pass its final hurdle in the Senate, many lawmakers are still reluctant to support it. Some conservatives say the package does not cut enough spending, and liberals complain the cuts are too deep and that the bill does not raise taxes on the rich.

Meanwhile, it is not clear if the deal contains enough spending cuts to avoid a downgraded credit rating. Standard & Poor's credit rating agency had threatened to downgrade America's AAA rating unless Congress passed at least $4 trillion in deficit cuts.

A downgraded credit rating would mean it would cost more for the government to borrow money, which could in turn raise interest rates on many consumer loans

US Congress Prepares for High-Stakes Debt Votes

The White House and congressional leaders of both major political parties are pressing rank-and-file legislators to support a last-gasp bipartisan deal to trim U.S. government spending and raise the federal borrowing limit. Votes are expected in both houses of Congress ahead of Tuesday’s deadline to raise the debt ceiling or risk a possible default on U.S. obligations.
Financial “Armageddon”
One day before the United States faces what President Barack Obama has called financial “Armageddon,” congressional passage of the compromise debt bill is far from assured. In a final effort to round up wavering votes, Obama dispatched Vice President Joseph Biden to Capitol Hill to address Democratic lawmakers from both chambers.

White House/David Lienemann

US Vice President Joe Biden records the weekly speech, May 27 2011

Biden was asked if he believes the bill cutting trillions of dollars in federal spending and extending the borrowing limit through next year will pass.

“Oh, that is up to the House [of Representatives],” he said.

It is in the Republican-controlled House of Representatives where the vote count is expected to be particularly close, given fierce opposition already expressed by its most conservative Republican - and progressive Democratic - members.
Mikulski: far from enthusiastic

U.S. Debt Deal Facts It allows the debt ceiling to rise by up to $2.4 trillion - enough to keep the country borrowing money until 2013. It includes spending cuts that could reach $2.5 trillion, to exceed the amount of the debt ceiling increase. It initally cuts spending by at least $900 billion over 10 years, and creates a bipartisan budget committee to find additional deficit reduction of at least $1.5 trillion. If the committee fails by late November to find additional ways to reduce the deficit, the failure would trigger automatic cuts across the government to take effect in 2013. Among them would be the first reduction in Defense Department spending in decades. The deal does not include the Republicans' goal of requiring a balanced-budget amendment. It also leaves out the Democrats' plan to end some tax cuts for the wealthy.

But even in the Senate, the vice president clearly had convincing to do. Democratic Senator Barbara Mikulski of Maryland says she does not want to risk a downgrade of the U.S. credit rating, but is far from enthusiastic about proposed cuts in federal spending that could harm the poor and vulnerable.
“I also need to know more about just where we are heading in terms of what these [budget] cuts mean,” she said.
Tea Party

On the Republican side, several members of the fiscally conservative Tea Party faction say the bill does not go far enough to rein in what they see as an out-of-control Washington spending binge. Senator Marco Rubio of Florida says he will vote ‘no’.

“I ran [for office] because I wanted this country to be put on a sustainable spending path. This bill does not do that," said Rubio. "There will come a time when we [the U.S. government] will not be able to borrow money, not because of the debt limit, but because our lenders will not lend it to us anymore. This plan does nothing to prevent that day from coming.”
Compromise

AP

President Barack Obama sits with House Speaker John Boehner of Ohio (L), as he met with Republican and Democratic leaders regarding the debt ceiling, at the White House (File Photo - July 14, 2011)

In announcing the agreement late Sunday, President Obama said the deal is far from perfect, but better than doing nothing and watching the nation fall into financial ruin. Senate Majority Leader Harry Reid echoed that message Monday.

“No one got what they wanted. Everyone had to give something up. It was a compromise," said Reid. "It is not always easy to get two sides to reach consensus. But that is what we did. We did it on a bipartisan basis.”

Republican congressional leaders who helped negotiate the deal with the White House and their Democratic counterparts say the bill achieves less in deficit reduction than they had hoped. But they note the bill contains no tax increases, a key Republican demand from the beginning of contentious negotiations that lasted several months.
Two rounds of spending cuts
If enacted, the bill provides for two rounds of spending cuts. The first round would produce $900 billion in budget savings over 10 years. The bill mandates the creation of a bipartisan congressional committee to identify more than a trillion in additional deficit reduction that would be subject to an up-or-down vote at the end of this year. The bill forces automatic cuts if the committee is unable to reach an agreement.

In return for deficit reduction, the bill would raise the U.S. debt ceiling by more than $2 trillion, enough to assure the federal government’s solvency through next year’s national elections. The U.S. national debt stands at $14.3 trillion.

US Debt Deal Compromise Leaves Many Unhappy

U.S. lawmakers hope to vote soon on a compromise plan to raise the nation’s borrowing limit in exchange for substantial cuts in government spending. The 11th hour compromise agreed to by President Barack Obama and U.S. congressional leaders prevents the United States from defaulting on its debt.  But it also leaves some people on both sides of the political spectrum unhappy with the result.

One of the key players in the congressional debt debate drama was the leader of the Republican minority in the Senate, Mitch McConnell of Kentucky.

It was McConnell who joined forces with President Obama late in the game to forge a bipartisan deal that will cut about $1 trillion over 10 years and will set the stage for additional cuts through a special congressional panel.

McConnell, speaking on the CBS program "Face the Nation", said, “We’ve got a history of robust political debate, but this country has always come together at critical moments and we are at one of those critical moments right now and we are going to come together and we are going to get the job done for the American people.”

U.S. Debt Deal Facts It allows the debt ceiling to rise by up to $2.4 trillion - enough to keep the country borrowing money until 2013. It includes spending cuts that could reach $2.5 trillion, to exceed the amount of the debt ceiling increase. It initally cuts spending by at least $900 billion over 10 years, and creates a bipartisan budget committee to find additional deficit reduction of at least $1.5 trillion. If the committee fails by late November to find additional ways to reduce the deficit, the failure would trigger automatic cuts across the government to take effect in 2013. Among them would be the first reduction in Defense Department spending in decades. The deal does not include the Republicans' goal of requiring a balanced-budget amendment. It also leaves out the Democrats' plan to end some tax cuts for the wealthy.

Public opinion polls showed that Americans wanted a compromise on the debt issue to avoid a default that many fear would have further weakened the U.S. economy.

In announcing the compromise, President Obama said that his appeals to public opinion for a bipartisan compromise helped to convince lawmakers that it was time to end the stalemate over raising the debt ceiling.
“It has been your voices, your letters, your emails, your tweets, your phone calls that have compelled Washington to act in the final days," he said.

The Tea Party faction was a major factor in driving the debate for spending cuts, especially in the House of Representatives where many of the 87 new Republican members owe some measure of support to Tea Party activists in their home districts.

Some lawmakers with Tea Party backing are unhappy with the compromise because they wanted deeper spending cuts.

But many Tea Party organizers are claiming credit for the deal and the scope of the spending cuts included.

“It was only eight months ago that the Democrats controlled both chambers of Congress and the White House and they [refused to deal with the issue]," said Amy Kremer of the Tea Party Express, who spoke on the C-SPAN public affairs cable TV network. "They didn’t do anything about it. That is completely irresponsible. The American people want this problem fixed."

Many liberal Democrats are far less happy with the deal, angered that the president went along with Republican demands for deep cuts without any tax increases as part of the final compromise.

“In order to please the Tea Party base of the Republican Party, they are literally holding our whole economy hostage and threatening to put a knife in our economy in order to protect tax cuts for millionaires and corporations and to win big cuts to vital services," said Justin Ruben, who is with the liberal organization MoveOn.Org and also spoke on C-SPAN.

Most analysts say Republicans will get credit for driving the debate over the debt and cutting the budget deficit.  But the deal could help President Obama with centrist voters when he seeks re-election next year.

Democratic political strategist Mark Penn says both sides have challenges in the months ahead.
“The president has to make a stronger case in stating the values behind what he is agreeing to.  And the Republicans, on the other hand, look like the only thing they are concerned about is cutting programs like Medicare and Medicaid," he said.

The debt deal will likely resonate in next year’s presidential and congressional elections where the domestic economy is expected to be the central issue.

White House, congressional leaders reach debt-limit deal

President Obama and congressional leaders Sunday night sealed a deal to raise the federal debt limit that includes sharp spending cuts but no new taxes, breaking a partisan impasse that has driven the nation to the brink of a government default.
The agreement brings to an end a self-created crisis that has consumed Washington, rattled Wall Street, and shaken confidence in the American political system at home and abroad. The deal could clear Congress as soon as Monday night — barely 24 hours before Treasury officials have said they could begin running short of cash to pay the nation’s bills.

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President Barack Obama says a deal has been reached to raise the government's debt ceiling and avoid a default. He said the deal includes more than $2 trillion in gradual spending cuts and no initial cuts to Social Security and Medicare. (July 31)

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Highlights of the deal.

More on this Story

• Obama, lawmakers reach deal on debt
• What’s happening today on Capitoll Hill?
• The Fix: Winners and losers in the debt deal
• Klein: Trigger that ended the impasse

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• In wake of debt deal, Asian markets surge
• Big win for GOP, large gamble for Obama
• Liberals, hawks are obstacles to deal’s coalition
• Right Turn: Defense spending cuts adjusted
• Senate conservatives won’t delay vote
• Senate chaplain’s prayers convey crisis
• Klein: Dems will lose now. But they can win later.
• Plum Line: GOP’s unprecedented victory
• Congress puts its faith in committee
• Get more news from PostPolitics
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Debt-ceiling drama unfolds

Timeline of negotiations

Passage of the agreement, however, remained far from certain in the House, where skeptical Republicans were just beginning to digest the details.
“This process has been messy. It’s taken far too long,” President Obama said in brief remarks at the White House. “Nevertheless, ultimately, the leaders of both parties have found their way toward compromise, and I want to thank them for that.
Obama said the agreement “will allow us to avoid default and end the crisis that Washington imposed on the rest of America. It ensures also that we will not face this same kind of crisis again in six months, or eight months, or12 months. And it will begin to lift the cloud of debt and the cloud of uncertainty that hangs over our economy.”
The deal was negotiated primarily by Vice President Biden and Senate Minority Leader Mitch McConnell (R-Ky.). It teetered all day on the edge of completion as House Speaker John A. Boehner (R-Ohio) bickered with Democrats over whether to freeze next year’s defense budget.
In the end, Boehner conceded the point, and Obama finalized the agreement in phone calls to each of the four congressional leaders shortly after 8 p.m.
The agreement would raise the $14.3 trillion debt limit in two stages by as much as $2.4 trillion. It represents a victory for Obama, allowing him to avoid another grueling fight over the debt limit in the heat of the 2012 presidential campaign.
But he failed to secure other top priorities, including fresh measures to revive the flagging recovery and an end to tax breaks for corporations and the wealthy. Obama said he would pursue those goals later this year, when, under the terms of the deal, a new congressional committee would begin searching for further ways to control the national debt.
“The ultimate solution to our deficit problem must be balanced,” Obama said Sunday. “That’s why the second part of this agreement is so important.”
Republicans, by contrast, won severe cuts to agency budgets over the next decade and the prospect of deeper cuts to come, delivering on the campaign promises that helped them gain control of the House in the fall congressional elections. Democrats also agreed to stage a vote on a balanced-budget amendment, which has become a rallying point for tea-party-aligned conservatives.
End of the impasse
The deal ends a painful political stalemate that had been in the making since the new GOP majority took control of the House in January. After a bitter showdown over this year’s budget nearly shut down the government in April, the parties launched into the debt-limit battle.

Obama: Agreement has been reached on raising debt limit

In an evening news conference, President Obama says the debt ceiling deal is not the one he would have preferred, but it will "allow us to avoid default and end the crisis Washington imposed on the rest of America."

Reid declares debt deal is finished

Senate Majority Leader Harry M. Reid said Sunday evening that all congressional leaders had agreed to a compromise plan to lift the debt ceiling. "We're moving forward together," Reid said. Immediately afterward, Minority Leader Mitch McConnell declared "there is now a framework" for a deal.

Obama, Republicans Still Wrangling Over Debt Solution

U.S. President Barack Obama on Saturday urged Congress to enter into what he called "shared compromise " in an effort to solve the country's debt and deficit problems.
In his weekly address, Mr. Obama said he is willing to do whatever it takes to solve the problem, even if it is not politically popular.  But he also noted the wealthiest Americans must "pay their fair share."

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A White House official said President Obama, Vice President Joe Biden, and other administration officials were discussing "various options" with congressional leaders from both parties.  However, no new talks were scheduled for Sunday.

With an August 2 deadline approaching to raise the $14.3 trillion debt ceiling or allow the United States to default,  the two sides appear far from an agreement.

Mr. Obama said earlier he would consider cuts in popular entitlements including pensions, health care for the elderly, and aid to veterans.  In return, the president has called for higher taxes on wealthy Americans and large corporations.  Republicans rejected the move saying it would hurt the economic recovery.
In the weekly Republican address, Senator Orrin Hatch of Utah blamed Democrats for the financial mess and said the president and his Democratic allies in Congress need to come up with a serious plan to control runaway spending.  Hatch said that cutting spending, limiting expenditures and requiring balanced budgets is the only long-term solution to the problem.

^{Watch the Republican weekly address:}

Speaker of the House of Representatives, Republican John Boehner, said Friday the House will vote next week on a $2.4 trillion measure to raise the debt ceiling through 2012 if Congress passes a Balanced Budget Amendment to the Constitution. 

President Obama said getting such major cuts without increasing revenue would cause unacceptably deep cuts in programs that are vital to many Americans. He also said elected officials do not need a constitutional amendment to make the tough spending decisions that are a key part of their jobs.

Meanwhile, credit rating agencies have warned that the U.S. government's credit rating would be downgraded if an agreement is not reached soon.

White House and Congressional Leaders: No Default on US Debt

The White House and congressional leaders remain adamant the United States will not default on its $14.3 trillion national debt, less than three weeks before a deadline for raising the federal borrowing limit.  But a bipartisan deal to put the nation on a sustainable fiscal path shows no sign of materializing.

On one point top Democrats and Republicans agree: failing to raise America’s debt ceiling in time to avert a default on federal obligations is unthinkable.  Jacob Lew is President Barack Obama’s top budget official. "All the leaders of Congress and the president have acknowledged that we must raise the debt limit, and the question is how," he said.

Lew spoke on ABC’s This Week television program.

The Senate’s number-two Republican, Jon Kyl, had a similar message. “The country will not default.  Whether or not there are savings achieved in the process remains open to question," he said.

Weeks of negotiations have failed to yield a so-called “grand bargain” to trim U.S. budget deficits by $4 trillion over 10 years.  The impasse has prompted several fallback plans to raise the debt ceiling if the $4 trillion target is not met.

Senate leaders are negotiating a plan that would allow President Obama to extend the federal borrowing limit even if majority votes in Congress do not materialize authorizing such a move.  In the Republican-controlled House of Representatives, a vote is expected later this week that would tie a debt ceiling increase to a more-modest deficit reduction target, as well as a constitutional amendment requiring a balanced budget.

Neither plan of last resort is seen as solving America’s fiscal woes.  Appearing on CBS’ Face The Nation program, Republican Senator Tom Coburn of Oklahoma criticized any attempt to shield Congress from painful votes to raise the borrowing limit. “It takes the pressure off all the politicians.  It allows us to pass a debt limit [increase] without making the hard choices that this country has to make," he said.

Another Republican, Senator Marco Rubio of Florida, blasted any scaling back of deficit reduction goals. “The real problem here is not the debt limit.  The real problem here is the debt.  If all we do is raise the debt limit, and it is not accompanied by a credible solution to America’s debt problem, we are in big trouble," he said.

August 2 is the deadline for raising the federal government’s borrowing limit.  Beyond that date, treasury officials say the U.S. government risks default.

Some Republican lawmakers have questioned this assertion, saying the United States could service the national debt and fulfill core obligations using tax revenue alone.  Democrats and the White House dispute the claim, saying the government would have to choose between interest payments on the debt, funding programs that provide income and health care for retirees, and funding the U.S. military.

Office of Management and Budget Director Jacob Lew says there is still time strike a deal and avert financial ruin.  But he adds that time is running out. “It is kind of unfortunate that things always have to get to the last minute.  Sometimes there are no consequences.  Right now, we are in a place where the world is watching, and we should get our business done," he said.

Credit ratings agencies have warned of a possible downgrading of U.S. debt, which would make U.S. Treasury bonds less attractive to investors and creditor nations and require higher interest rates to attract purchasers.  Economists warn that higher interest rates would cripple America’s shaky economic recovery.