From Wall Street to Beijing with a nod to Paris, the heads of major international organizations and major employers pressure members of Congress to resolve the debt crisis and avoid historically unprecedented financial consequences.
Three weeks into the suspension of government functioning, there is still no agreement between Republicans and Democrats. And the entire world is concerned. The United States began its third week of “shutdown” under the magnifying glass of the largest international organizations, with bankers and industrialists perplexed about the risks faced by the global economy should the US government fail to honor its commitments.
IMF, World Bank: “Global economics will be affected
Prior to this crucial week on Capitol Hill, Christine Lagarde, the IMF chief, forewarned against the lack of an agreement. Should the US default on debt commitments, a global loss of financial confidence may result, and therefore the global economy could face a “massive disruption,” and “a plunge into recession,” she told us on October 12 on NBC. An opinion shared among OECD countries by the secretary of the organization, Jose Angel Gurria.
The President of the World Bank, Jim Yong Kim said that, “the closer we come to the fateful day, the greater the impact especially on developing countries.” “Failure to act swiftly could result in higher interest rates, loss of confidence, and slower growth rates,” he said during a meeting of his organization in Washington.
This past week, China and Japan, the primary stakeholders in the U.S. Treasury bonds expressed their concern: The specter of a US default horrified Beijing and Tokyo. And Noyer fears “a thunderclap.”
The European Commissioner for Economic Affairs, Olli Rehn, warned on Monday prior to the meeting of finance ministers in the Euro Zone that a default, could have devastating impacts for the global economy, and recovery in Europe.
The Governor of the Bank of France, Christian Noyer, forewarned likewise of a “global thunderclap in the financial markets, extremely violent and pervasive global turmoil.” Continuing, “A deadly disease,” a “dire crisis” unfathomable for bankers
The Codirector of the Deutsche Bank, Anshu Jain stated, “There is no life beyond a US financial default.” this situation would be similar to a “deadly disease and would spread very quickly.” The head of the German establishment does not recommend a response, as it seemed inconceivable. Even a “low level” default, short-term or medium-term, would be “absolutely devastating” for him, reports Bloomberg.
Considering the role of the US dollar, the consequences would be absolutely disastrous” said the director of BNP, Baudouin Prot, at a conference on October 12th.
Such a situation, “could spread through the world economy in a way that you cannot even imagine”, said Jamie Dimon, the Executive Chairman of JP Morgan, at a conference in Washington at the end the last week.
Warren Buffett calls it a “nuclear bomb.
Eight days earlier, with the specter of default looming, even if it seemed more distant was already agitating to financial forecasters. Billionaire Warren Buffett compared the threat of default to a “nuclear bomb.” He denounced the political use of this possibility to block the enforcement of laws in the United States. In this case, it was the reform of the health system. For him, the use of such a “weapon of mass destruction” should be illegal.
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