Economy
Yellen: default in the U.S. threatens a global catastrophe
Speaking at a conference in Washington on Tuesday night, U.S. Treasury Secretary Janet Yellen warned that a default on the national debt would be a disaster for the U.S. economy, leading to massive unemployment, defaults and a rising interest rate for eternity.
“The U.S. has been paying all its bills on time since 1789, and that’s the way it should be,” Yellen said.
She also stressed how catastrophic the consequences for the economy would be if the U.S. were unable to meet its debt obligations, as negotiations to raise the national debt ceiling have stalled.
On Wednesday, the U.S. House of Representatives approved a bill to raise the national debt ceiling by 1.5 trillion dollars because of the looming threat of default.
In particular, she said that the default would lead to the fact that the government will not be able to finance the armed forces, and social security, and massive layoffs of civil servants are expected. Yellen also said that households would risk defaulting on their mortgages, car loans and credit cards, leading to a collapse of the credit market in the United States.
She also warned that the rate could rise indefinitely. “Defaulting on our debt would lead to economic and financial disaster,” Yellen added.
The U.S. Treasury Secretary went on to remind us that this economic catastrophe is avoidable, and the solution is simple. Congress must vote to raise or suspend the debt limit, and it must do so unconditionally, without waiting for the last minute.
Last week, House Speaker Kevin McCarthy proposed a bill to reduce government spending by $4.5 trillion to raise the debt limit by $1.5 trillion.
In the end, the U.S. Treasury Department took emergency measures to avoid an immediate budget crisis that would last only a few months, with the risk of default this summer if politicians do not reach an agreement.
Earlier we reported that French LVMH became the first European company with a market capitalization of more than $500 billion.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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