US default could trigger global recession, warns IMF

A US default could cause a global recession, said Christine Lagarde, Managing Director of the International Monetary Fund.

Lagarde said it would result in “massive disruption the world over”.

If a country has a debt and it fails to repay it, it has defaulted.

In an interview during ABC Tv’s ”Meet the Press”, Lagarde urged the U.S. to raise its debt ceiling before the October 17th deadline.

Lagarde said:

“If there is that degree of disruption, that lack of certainty, that lack of trust in the US signature, it would mean massive disruption the world over and we would be at risk of tipping yet again into recession.”

Lagarde explained that during the 2013 IMF-World Bank Annual Meetings in Washington D.C. (October 11 to 13), she had spent three days with approximately 300 finance ministers and governors of central banks from across the world. They were all talking about a positive global recovery. They said the U.S. is doing well, and even Europe “at last”, Japan is turning the corner, the emerging countries continue to grow fast, the low-income countries are “really showing strong growth”.

When the IMF, World Bank, finance ministers and governors of central banks realized what might happen if the U.S. failed to raise its debt ceiling, the atmosphere in the meeting completely changed, Lagarde added.

US default – World Bank warns of disaster

Jim Yong Kim, president of the World Bank, said at the Annual Meetings 2013 Closing Press Conference on October 12th, 2013:

”We are now five days away from a very dangerous moment. I urge US policymakers to quickly come to a resolution before they reach the debt ceiling deadline. The closer we get to the deadline, the greater the impact will be for the developing world.

Inaction could result in interest rates rising, confidence falling, and growth slowing. If this comes to pass, it could be a disastrous event for the developing world, and that in turn will greatly hurt the developed economies as well. I urge US policymakers to avert this potential crisis.”

US default – leaders warn of dire consequences

Business leaders, experts and high-ranking government secretaries have all warned of the dire consequences of a US default on the world and its own domestic economy, as well as America’s standing internationally.

U.S. Treasury Seceretary, Jacob Lew said “failure to meet that responsibility would cause irreparable harm to the American economy.”

Lloyd Blankfein, head of Goldman Sachs, along with more than ten other leaders of major Wall Street banks, visited the White House. Blankfein urged “There’s a consensus that we shouldn’t do anything that hurts this recovery. They shouldn’t use the threat of causing the U.S. to fail on its obligations to repay its debt as a cudgel.”

The world should de-Americanize, says China. Chinese news agency Xinhua writes “As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world.”

As an elderly Englishman who has always viewed the U.S.A. as the flagship of free enterprise and an example to the world, I shudder at the thought of another great civilization “fiddling while Rome burns”. Perhaps more apt this time would be “infighting while the world’s number 2 grabs the reigns”.

We live in a competitive universe. Bacteria fight for dominance, as do genes, black holes, galaxies, and civilizations. This world of ours is no exception. The greatest enemy of every great power throughout our history has been complacency. I sincerely hope American lawmakers can see beyond their immediate hate for each other, and pull together for the sake of their country, and if their hearts allow, for the sake of the world.