Goldman Sachs and Treasury Secretary Janet Yellen warns of the US default’s catastrophic consequences and emphasized the real risk it poses to the US dollar. With the United States grappling with a mounting debt crisis, experts fear that failing to raise the debt ceiling could have far-reaching implications for the nation’s economy and its position in the global financial system.
Catastrophic Consequences: Implications of a US Default
Goldman Sachs, one of the world’s leading investment banks, has raised alarm bells over the prospect of a US default. According to a high-ranking executive at Goldman Sachs, who also chairs a Treasury advisory committee, the possibility of a US default carries a genuine threat to the US dollar.
The executive emphasized the adverse implications, stating that any shift away from the US dollar being recognized as the world’s reserve currency and the safest, most liquid asset would have detrimental effects on the American people, the dollar itself, and the US government.
Treasury Secretary Janet Yellen echoed these concerns as she warns of the US Default’s catastrophic consequences emphasizing the gravity of the situation. In a recent statement, Yellen highlighted that a default would have “catastrophic consequences” for the US economy, including a potential recession, skyrocketing interest rates, and a significant depreciation of the US dollar. She called on lawmakers to urgently raise the debt ceiling and avoid such an outcome.
Alignment between Goldman Sachs and Treasury Secretary Yellen on Risks of US Default
Expressing her concern over a potential US debt default, the Goldman Sachs executive described it as a perplexing situation for international investors. She highlighted their confusion regarding the appropriations made by the US government and its reluctance to fulfill the agreed-upon financial obligations.
The executive said, “I think there is real risk to the U.S. dollar as we leave this in a more protracted state of negotiations. Anything that moves us away from being viewed as the world’s reserve currency, of being the safest most liquid asset in the world, is bad for the American people, bad for the dollar, and bad for the U.S. government.”
Treasury Bill Market
As Treasury Secretary Janet Yellen and the Congressional Budget Office sounded the alarm about the possibility of the United States defaulting on its debt obligations starting next month, the Treasury bill markets reacted accordingly, factoring in the associated risks.
In agreement with Secretary Yellen, the Goldman Sachs executive acknowledged the grave implications a US default would have on the American economy. Furthermore, she highlighted the potential for a significant ripple effect if the Treasury were to halt certain payments.
Pre-G7 meeting in Japan statement
During a press conference preceding a G7 meeting in Japan, Yellen expressed her concerns about a potential default, emphasizing the detrimental impact it could have on both the United States’ global economic leadership and its ability to safeguard national security interests.
In recent statements, a lawmaker underscored the risks posed to the US dollar’s reserve currency status in the event of a default. Federal Reserve Chairman Jerome Powell has echoed these concerns, issuing a warning about the potential “uncertain and adverse consequences” resulting from a US default on its debt obligations.
As Goldman Sachs and Treasury Secretary Janet Yellen warn of the US default’s catastrophic consequences with risks to the US dollar and the broader economy, urgent action is needed to raise the debt ceiling and avert a financial crisis. The stakes are high, and the world is watching as lawmakers grapple with this critical issue that could have far-reaching implications for the United States and the global economy.
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