2023-05-15 02:00:07
Moviegoers remember the anthological car racing scene in The fury to live (Rebel Without a Cause1955, by Nicholas Ray) with James Dean: the two vehicles are launched at full speed towards the cliff, and “the first one to jump is a wimp”. Except that sometimes a jacket strap can get caught in the door and prevent one of the drivers from getting out in time, who then tips over the precipice. The same goes for the debate on raising the debt ceiling.
In a few weeks, the United States will reach the debt ceiling set by Congress at 31,381 billion dollars (about 29,000 billion euros), and the two adversaries refuse to give in. On the one hand, the Republican speaker (speaker) of the House of Representatives, Kevin McCarthy, who wants to condition this increase on clear cuts in the federal budget; on the other, the Democratic President, Joe Biden, who refuses any conditionality and repeats at will that he will not give in to blackmail. “Failing is not an option. We pay our bills. And avoiding default is a basic duty of the United States Congress.”, said the president after a meeting with members of Congress on Tuesday, May 9.
Except that the date of bankruptcy is approaching: perhaps from the 1is June, according to Treasury Secretary Janet Yellen, due to lower tax receipts. In the weeks or months that will follow in any case. And the risk of an accident increases: a default on the American debt. Negotiations behind closed doors took place over the weekend and the parties are due to meet again the week of May 15, which gives a slight wind of optimism.
“To default on our debt would undermine the United States and the global economy so much that everyone should regard this idea as unimaginable”, warned Janet Yellen Thursday, May 11, ahead of a meeting of G7 finance ministers in Japan. Nevertheless, the markets are beginning to worry. “The closer you get, the more panic you will have” on the stock and bond markets, warned Jamie Dimon, CEO of JP Morgan. This is basically already the case, with the surge in credit default swapswhich are, to simplify, insurance on the risk of default on US debt: their cost has more than doubled compared to the previous crisis of 2011.
“We haven’t learned anything”
“The case is a little more worrying than usual. We haven’t learned anything, laments Jason Furman, former economic adviser to Barack Obama and professor of economics at Harvard. We have a speaker who has a small majority, less interested in a compromise, facing a president who has a negotiation strategy dure. » Olivier Jean Blanchard, former chief economist of the IMF, is hardly optimistic either.. “The risk of an acute but temporary crisis is high – temporary because the crisis would force an agreement. »
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