Economy
Yellen: U.S. financial and economic disaster awaits if Congress fails to raise the debt ceiling
Is the U.S. economic crisis getting closer? U.S. Treasury Secretary Janet Yellen said the country faces a financial and economic disaster if Congress and the White House do not act to raise the national debt ceiling. She said inaction by lawmakers and the government would lead to a default, and it would “cause a financial and economic disaster.”
“In the long run, a default would increase the cost of borrowing indefinitely. Future investments, including government investments, would become significantly more expensive. This increases the risk of U.S. economic collapse,” Yellen said, speaking at a meeting of the National Association of Counties.
She added that in the event of a default, “household payments on mortgages, auto loans and credit cards would rise, and U.S. businesses would face deteriorating credit markets.”
“In addition, it is unlikely that the federal government would be able to issue payments to millions of Americans, including families of our military and seniors who rely on Social Security,” the secretary warned.
As Politico notes, Yellen’s statements come ahead of Congressional Budget Office projections expected to be releasedWednesday, which clarify the agency’s expectations for when the Treasury will no longer be able to pay its obligations in full if the debt limit is not raised. All of this has ramifications for the stock market, the S&P 500 and other indices.
In January, Yellen warned in a letter to congressional leaders that “government default would cause irreparable harm to the U.S. economy, the livelihoods of all Americans and global financial stability.”
She said an increase or suspension of the debt limit was needed to avoid a default. The current limit is $31.4 trillion.
The debt ceiling was reached on January 19. At the same time, according to media estimates, “Day X” may come about the middle of this year. Yellen believes that the accumulated cash reserves may be enough until early June.
The debt ceiling debate sparked a political standoff between Republican lawmakers who control the House of Representatives and who want to cut spending and President Joe Biden and Democratic lawmakers who insist on raising the debt limit unconditionally.
Earlier we reported that the heads of the leading U.S. banks are optimistic about the U.S. economy, but reasons for concern remain.
The consensus among investors is that the U.S. Federal Reserve will raise rates again before the end of the year and will not loosen its monetary policy until 2024, which is a bearish outlook for the stock market. So it’s important to be prepared for a drop in the S&P 500 and other indices.
That’s the prevailing view of about 350 respondents to the Instant MLIV Pulse survey after Wednesday’s Federal Open Market Committee meeting.
The findings contrast with the interest rate swap market, which is still struggling to gauge a rate cut this year. More than 70% of MLIV Pulse respondents said the Fed is not done raising rates yet. More than half said they expect the central bank to wait with its policy easing until next year.
The survey results are in line with Fed officials, but go against traders who estimated this year’s rate cut has led to lower Treasury yields.
Swap markets expect the Fed rate to peak at around 4.95% in May and then fall to about 4.2% in December.
Earlier we reported that the U.S. Department of Justice has begun investigating the collapse of Silicon Valley Bank.
High-tech startups have been hit. Companies around the world are facing a fight for survival after the collapse of a major US investment bank, Silicon Valley Bank (SVB). There was a “huge disruption” in the industry globally, Bloomberg reported, citing market participants. The entire stock market, and the S&P 500 in particular, plummeted.
Startups under threat
The bankruptcy of the lending institution, in particular, affected the co-founder of startup Birdly Inc. Quang Hoang. The entrepreneur invested about $10 million in SVB and is still unable to repay the money four days after the bank was shut down by the California Department of Financial Protection and Innovation. However, the entrepreneur is far from the only one who has faced similar problems, the article specifies.
“Hoang was one of thousands of founders around the world this week trying to track down their money after days of chaos and who are completely rethinking the way they run their own businesses. Startups from Silicon Valley to London to Tel Aviv to tech hubs across Africa have depended on SVB as a one-stop store for everything from storing their fortunes to personal mortgages,” the story says.
Now investors and technology companies are predicting a complicated financial future for themselves, even if the bankrupt bank begins to attract deposits from customers under a new name. Many market participants faced a “financial payback” for their overreliance on the credit institution’s risky investment assets, the memo said.
On March 11, the California Department of Financial Protection and Innovation closed Silicon Valley Bank, a large investment bank based in Santa Clara County. All insured deposits from SVB were transferred to Deposit Insurance National Bank of Santa Clara. Depositors were expected to have access to their accounts by March 13.
Earlier we reported that the U.S. Department of Justice has begun an investigation into the circumstances of the collapse of Silicon Valley Bank.
The U.S. Justice Department is set to investigate the circumstances surrounding the bankruptcy of Silicon Valley Bank (SVB), which was the largest since the global crisis in 2008. The entire stock market collapsed, in particular the S&P 500. This was reported by The New York Times (NYT), citing two people familiar with the situation.
The sources of the newspaper noted that the investigation is at a very early stage, and it is not yet very clear what the focus of federal investigators and prosecutors will be.
Lawyers believe that the main point that may attract investigators is that a few weeks before the crash of SVB, several top managers sold their shares. The sale of securities brought the sellers millions of dollars.
Market experts pointed out that some top managers sold their shares by previously announced plans, so that such sales would not seem illegal. For this purpose, the date of sale of securities and their volume are chosen in advance. However, some politicians have already said that all of the bank’s top managers should return the money received from the sale of shares.
Earlier on Wednesday, the Wall Street Journal, citing its sources, wrote that creditors of the bankrupt bank SVB joined to make profits after the collapse of the financial institution.
Earlier, we reported that an American billionaire declared the collapse of American capitalism.
-
Forex8 months agoForex Today: the dollar is gaining strength amid gloomy sentiment at the start of the Fed’s week
-
Forex4 months agoUnbiased review of Pocket Option broker
-
World5 months agoWhy are modern video games an art form?
-
Forex8 months agoHow is the Australian dollar doing today?
-
Cryptocurrency8 months agoWhat happened in the crypto market – current events today
-
Stock Markets3 months agoAmazon layoffs news: company announces record layoffs
-
Stock Markets8 months agoMorgan Stanley: bear market rally to continue
-
Forex7 months agoDollar to pound sterling exchange rate today: Pound plummeted to its lowest since 1985
