Time is not only running out, but it is running out: without an increase in the debt ceiling, the United States could default on June 1, unleashing an "unprecedented economic and financial storm". Janet Yellen sounds the alarm ahead of the long-awaited meeting between Joe Biden and House Speaker Kevin McCarthy, whose positions on how to raise the debt limit, ensuring that the US continues to honor its commitments, remain - at least on paper - far away.
Despite a hectic weekend of negotiations, there is currently no agreement on how to resolve the impasse that has been created. And the time available is not much given the June deadline and Biden's expected departure for Japan's G7 and visits to Papua New Guinea and Australia for the Quad meeting. The American president is determined - the White House has repeated several times in recent days - not to change his agenda and therefore to leave for Hiroshima, the first stop on his eight-day tour outside the States, on Wednesday.
U.S. Secretary of the Treasury Janet Yellen
Behind the scenes, administration officials and Republican officials are working hard to avoid a catastrophic default that would also jeopardize America's rating. To try to facilitate a deal, a small group of moderate Democrats has also assured McCarthy that it will support him in the event that a debt ceiling deal causes a rebellion among the ranks of the Conservatives and a call for his removal as speaker. An opening, it is the belief, that could push the leader of the Republicans in the House to greater concessions in the awareness of his secure political future.
So far cold on the subject Wall Street is beginning, now to falter under the weight of negotiations still far from a solution, fearing a repeat of 2011 when S&P cut the US rating due to tensions on the debt ceiling. As investors seek shelter in Big Tech stocks, believed to be among the few that can navigate a default, the CEOs of large companies join Yellen's warning. In an open letter they warn Biden and Congress about the "potentially disastrous consequences" of a default. "Not resolving the current impasse could easily result in even more negative consequences. Although the US economy is strong, high inflation has created stress on the financial system. A default would weaken our position in the world's financial system."
"In recent years, American families and businesses have worked hard to bring about a historic economic recovery. A default would reverse this trend," Yellen told the Independent Community Bankers of America, noting that the financial crisis that will accompany the default will "multiply" the severity of the economic slowdown. Yellen then explains how the US Treasury market is the basis of the global financial system and a possible default would cause cracks in this foundation and risk shaking the entire system.
ANSA Agency
US CEOs to Biden and Congress, 'a default would be disastrous' - World
The open letter of the big big companies reported by CNN: 'it would weaken our position in the world financial system' (ANSA)