The world could be on the brink of a global financial crisis if the US debt ceiling is not raised. On Thursday, the US hit her $31.4 trillion debt ceiling on Thursday and began taking steps to stop the crash from happening. If the United States defaults on its debt, it could be devastating to the global economy.
As the crisis loomed, President Joe Biden entered into talks with those who could solve the problem, including Republican House Speaker Kevin McCarthy.
McCarthy may raise US debt ceiling to avert catastrophe. However, this means that the Democratic president will agree with the Republican on this issue. JPMorgan Chase Bank has warned that failing to secure the deal would have devastating consequences for the U.S. and global economy.
Jamie Dimon, CEO of JPMorgan Chase, told CNBC’s Squawk Box:
“Of course Democrats can accuse Republicans, and Republicans can accuse Democrats. It’s part of the world’s financial structure, which is not something we should be playing games with.
“Americans basically need to understand that the American financial system is the core of the global financial system and they should not play with it.”
“I respectfully ask Congress to act swiftly to fully protect America’s credibility and credit,” Treasury Secretary Janet Yellen said in a letter.
She added that a U.S. debt default would “irreparably harm the U.S. economy, the lives of all Americans, and global financial stability.”
Economists say a default in the US could cost 6 million jobs overnight.
The president’s spokesperson, Carine Jean-Pierre, said there was an “obligation” to raise the limits.
“As the president has said many times, raising the debt ceiling is not a negotiation. It is the duty of this country and its leaders to avoid economic chaos,” she added.
“Congress has always done it, and the president expects them to do their duty again. It’s non-negotiable.”
US debt limits have been around for over a century. Its purpose is to limit the amount of money the United States can borrow.
Since its introduction, it has been raised regularly and currently stands at around $34.1 trillion, about 120% higher than the country’s overall GDP.
We don’t owe our debt to one person, we owe it to institutions and people around the world, but only two-thirds of it is in the United States.
Japan, China, and the UK top the list the US owes.
You can redo numbers to buy time, but numbers buy only a limited amount of time, just as water can only buy a sinking ship.
Regarding the impact of a default, Goldman Sachs economists said, “It seems likely that uncertainty over the 2023 debt ceiling will lead to significant volatility in financial markets.
Failure to raise the debt limit by the deadline “will pose greater risks to government spending and ultimately to economic growth than to the debt itself.”
They also noted that consumer confidence at home and abroad will fall.
The United States is the center of the world economy, and America’s economic damage affects the world.
Famously, the 2008 financial crisis started in the United States, but quickly spread around the world.
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