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A default by the US on its debt could harm the country’s position as the world’s reserve currency, Goldman Sachs Executive Beth Hammack has warned. Hammock, who serves as chair of the US Treasury Department’s Borrowing Advisory Committee, which advises on managing the federal debt and reducing borrowing costs, said a default would be “bad for the American people, bad for the dollar, and bad for the US government.” The warning comes as the US government edges closer to being unable to meet all its commitments, prompting Treasury Secretary Janet Yellen to say a default would have “catastrophic consequences for the US economy.”
This article originally appeared on news.bitcoin.com
Goldman Sachs and former Federal Reserve Chair Janet Yellen recently issued warnings of the catastrophic consequences that the United States faces if it defaults on its debt. Yellen, the current Treasury Secretary under President Joe Biden, warned that a default on U.S. debt would be an “unprecedented event” and would have severe consequences for the economy.
Goldman Sachs, one of the world’s largest investment banks, echoed Yellen’s concerns, stating that a U.S. default would be a “major shock” to the financial system and could lead to a “severe recession” or worse. The bank also warned that the dollar could lose its status as the world’s leading reserve currency if the U.S. defaults on its obligations.
The warnings come as the United States approaches a critical moment in the debt ceiling debate. The debt ceiling is a statutory limit on the amount of money that the U.S. government can borrow to fund its operations. If the debt ceiling is not raised by October 18, the U.S. government could run out of money and default on its debt.
The debt ceiling has become a political football in recent years, with both Democrats and Republicans using it as a bargaining chip in budget negotiations. However, the stakes have never been higher than they are today. The COVID-19 pandemic has already put a strain on the U.S. economy, and a default on U.S. debt would only make matters worse.
The consequences of a U.S. default would be felt around the globe. The U.S. dollar is the world’s most widely used currency, and any disruption to its stability could impact financial markets worldwide. A default could also cause interest rates to rise, which would make it more expensive for individuals and businesses to borrow money.
In addition to the economic consequences, a U.S. default would also damage the country’s reputation as a responsible global leader. The United States has long been viewed as a reliable partner in the international community, and a default would call that into question.
The Biden administration has called on Congress to act quickly to raise the debt ceiling and avoid a default. However, the political climate in Washington has proven to be a significant obstacle. Republicans have been resistant to raising the debt ceiling without significant concessions from Democrats on issues such as infrastructure spending and tax policy.
The coming weeks will be critical in determining the outcome of the debt ceiling debate. It is imperative that lawmakers put partisanship aside and act in the best interests of the country by raising the debt ceiling and avoiding a catastrophic default. The stability of the U.S. economy and the international financial system depends on it.
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