Goldman Sachs, Yellen Warn of ‘Catastrophic Consequences’ of US Default – ‘Real Risk to US Dollar’


Goldman Sachs’ senior executive and chairperson of the U.S. Treasury Department’s Borrowing Advisory Committee Beth Hammack warned that the default of the United States poses a serious threat to the U.S. dollar. She stressed that anything that moves us away from being viewed as the world’s reserve currency and 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.

Hammack spoke on Bloomberg Television Tuesday and said that a possible default on the U.S. government debt was possible. She said that this is a conundrum for all international investors and that they don’t understand why the U.S. has made these appropriations and yet is not willing to pay the bills that have already been agreed to pay.

The Goldman Sachs executive warned that there is real risk to the U.S. dollar as negotiations are left in a more protracted state. She cautioned that 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, the dollar, and the U.S. government.

The chairperson of the Treasury Borrowing Advisory Committee also warned that the dislocations that are occurring in the U.S. Treasury Bill markets can create extra cost for the taxpayers. The Treasury bill markets began to factor in the risk of the U.S. failing to meet its debt obligations as early as next month.

Treasury Secretary Janet Yellen warned at a press briefing ahead of the G7 summit in Japan that a default would be a failure to pay and could risk undermining U.S. global economic leadership and raise questions about our ability to defend our national security interests. Federal Reserve Chairman Jerome Powell has also warned of “uncertain and adverse consequences” from the U.S. defaulting upon its debt obligations.

The Goldman Sachs executive agreed with Treasury Secretary Yellen that if the U.S. defaulted on its debt obligations, it would have “catastrophic consequences for the U.S. economy” and a huge ripple effect if some payments were stopped.

What do you think of the Goldman Sachs executive’s warning? Let us know in the comments.

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