US shutdown two days from global disaster--US shutdown two days from global disaster : On the verge of a deal. That’s how much time is left for politicians to work out a deal to raise the borrowing limit and avoid an unprecedented US debt default.

The deadline looms as the government shutdown enters its third week and negotiations move to the Senate, after a political gridlock in the House of Representatives.

Here’s the latest on the US situation

Democrat Senate majority leader Harry Reid and Republican leader Mitch McConnell have now taken centre stage in the negotiations as talks moved to the Senate after a deadlock in the House of Representatives.

Overnight, the pair met to discuss raising the $16.7 trillion debt limit until at least mid-February and reopening the government with enough funds to operate until mid-January. President Barack Obama has also postponed an important meeting to let their talks continue.
Earlier this week Mr Reid said he was “optimistic” they would reach a “reasonable” agreement, while Republican leader Mr McConnell called the talks “constructive exchanges”.
No solution has been reached yet, but President Obama also sounds optimistic.

“My hope is that a spirit of cooperation will move us forward over the next few hours,” he said while volunteering at a soup kitchen. Although he also added a swipe at Republicans saying if they don’t set aside partisan concerns “we stand a good chance of defaulting”.

What does it mean for the markets?The looming debt ceiling is casting a long shadow over financial markets around the world, which have shown extraordinary volatility in recent days depending on the mood in Washington.
On Monday, the US Dow Jones turned a 100 point loss into a 64 point gain amid signs a deal might be reached, while the S&P 500 and Nasdaq also closed slightly higher.
The Australian dollar jumped to a one-month high this morning of just above 95US cents on news a resolution could be in sight.

CommSec’s chief economist Craig James said despite the prospect of an “unthinkable” default, markets are currently showing signs of optimism the issue will be resolved.
“They can do it the easy way or the hard way. The easy way is to conclude over the next day, the hard way is to push into default and push turmoil into markets.

“If [talks] do get successfully concluded its positive for global economic growth and commodity producers like Australia. If we have the other side and the unthinkable happened it would be a sign of short-term dislocation … That would really force [politicians] hand,” he said.

Treasurer Joe Hockey – in Washington to meet with the World Bank (WB) and the International Monetary Fund (IMF) – said the Australian government had plans to deal with the fallout of a US default, although the prospect still seemed “inconceivable”.

“Certainly we have back-pocket plans to deal with whatever arises over the next few weeks as a result of negotiations,” he told CNBC.

Mr James said the Australian economy was well placed in the event of a default, with room for manoeuvre on interest rates.

“The Reserve Bank is well placed to support peoples confidence and certainly central banks around the world would have some plans in place,” he said.

“If you had a situation where you have the default and it still wasn’t resolved it does put a brake on economic momentum … If you stop the economy dead and people stop spending, investing and employing, you want to avoid that happening.”