daily economic news
2023-01-22 16:28:43
Edited by Duan Lian Yi Qijiang
According to CCTV news on January 21, U.S. Treasury Secretary Janet Yellen warned on January 20 that any failure to repay the debt is a default.If the federal government fails to pay its debts, it will trigger a U.S. recession with widespread repercussions。
U.S. Treasury Secretary Yellen Photo Source: Visual China
Yellen warned: US government debt default may cause global financial crisis
Yellen said in an interview with CNN on the same day that if the U.S. Congress fails to raise the debt ceiling in time and the federal government cannot repay its debts, “it will undoubtedly lead to a recession in the U.S. economy”, many people will lose their jobs, and borrowing costs will also rise. Yellen said,A debt default would trigger a downgrade of the U.S. sovereign debt rating, weaken the dollar’s status as the world’s reserve currency and could “create a global financial crisis”。
Yellen said on the same day that if the federal government fails to meet its payment obligations, whether it is its debt holders or Social Security beneficiaries, it “constitutes an effective default.” The Treasury system was set up “to pay all debts as they come due without prioritizing one form of debt”. She emphasized that it is difficult to determine how long the extraordinary measures taken by the Ministry of Finance to avoid defaulting on the government debt will last,May run out as early as June。
Yellen said in a letter to Congress on the 19th that since the federal government has reached the statutory debt limit of 31.4 trillion US dollars (about 213 trillion yuan), the Treasury Department will take special measures to prevent the federal government from defaulting on its debt. Currently,Partisan confrontation in Congress over raising debt ceiling。
According to the official WeChat of CCTV Chinese International, White House press secretary Karina Jean-Pierre confirmed on the 20th local time that US President Biden will hold a meeting with House Speaker Kevin McCarthy to discuss raising the debt ceiling. Republicans, who hold the majority in the House of Representatives, have previously said,Will not agree to raise debt ceiling unless Biden agrees to slash spending levels。
Image source: Visual China-VCG111371436204
Karina Jean-Pierre said that Biden said that the debt ceiling issue should not be used as a political bargaining chip and is not a negotiable issue. Raising the debt ceiling is the obligation of the United States and its leadership to avoid economic chaos.
Wall Street giants: the deadline may come in late summer and early autumn Expert: The most government “shut down”
The debt ceiling is the maximum amount set by Congress for the federal government to borrow money, including Social Security and Medicare, military pay, and more. According to the U.S. Government Accountability Office (GAO),Never before in U.S. history has the federal government defaulted on a debt. Between 1997 and 2022, the federal government debt ceiling was raised 22 times.
The current U.S. debt ceiling is about 31.4 trillion U.S. dollars (about 213 trillion yuan) established in December 2021. Hitting the debt ceiling means that the US Treasury Department’s borrowing authority has been exhausted, the government faces a “technical default”, and the federal government will also face the risk of a shutdown.
This is the building of the Treasury Department taken in Washington, D.C., the capital of the United States on January 20.Photo by Xinhua News Agency reporter Liu Jie
On January 13, Yellen sent a letter to McCarthy, urging members of Congress to “take timely action to raise or temporarily remove the debt ceiling.” Since 1985, the U.S. Treasury Department has taken special measures to avoid debt default more than ten times.
However, the current fierce battle between the two parties in the US Congress around raising the debt ceiling has aroused people’s concerns. The “New York Times” stated that this year’s partisan chaos will be the worst in at least a decade. After Republicans took control of the House of Representatives, they passed new legislative rules that make it more difficult to raise the debt ceiling and emphasized that any increase in the limit must be accompanied by spending cuts. Senate Republicans also demanded that raising the debt ceiling be tied to “structural spending reforms.”
The Democratic Party has no intention of making concessions, and the White House urged Congress to unconditionally resolve the debt ceiling issue.U.S. President Joe Biden says he opposes any attempt to tie spending cuts to raising the debt ceilingwhich would increase the likelihood of a prolonged stalemate between the two sides.
The Biden administration will prioritize negotiating a new bill to raise the debt ceiling after the mid-April tax deadline, according to a senior White House official.
U.S. financial institutions are generally pessimistic about the prospect of the U.S. default. According to Goldman Sachs,The risk that the government won’t be able to pay its “bills” this time is probably the highest since 2011. Bank of America has also judged that the possibility of a U.S. debt default is higher than in the past few years.Deadline could come in late summer or early fall this year。
Goldman Sachs has warned that the U.S. political and fiscal situation in 2023 will be similar to the two highly damaging debt ceiling hikes in 1995 and 2011. Both the impasse in the U.S. Congress have led to heightened market volatility, with U.S. Treasury bonds maturing around the debt-limit deadline being sold off sharply.
Moody’s previous report warned that a default by the U.S. government would result in the loss of about 6 million jobs and $15 trillion in household wealth in the United States. also,U.S. credit rating down, could send U.S. housing and auto rates soaring。
However, Pan Rui, a professor at the Center for American Studies at Fudan University, and Ding Yifan, a senior researcher at the Taihe Institute, pointed out that a default on the debt means that the credit of the U.S. dollar will decline, and U.S. debt will be sold in large quantities, and there may be no takers. At the same time, the capital market will fluctuate sharply, triggering the US sovereign credit crisis.Because the cost of default is too high, the United States will not really default, that is, it will be unable to repay its debts. At most, there will be a government “shutdown”。
edit|Duan Lian Yi Qijiang
proofreading|Lu Xiangyong
The daily economic news is synthesized from CCTV News, CCTV Chinese International, Everyjing.com (Reporter: Zhang Lingxiao), public information, etc.
