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U.S. Default Prevention Talks Paralyze Markets

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President Joe Biden joined Kevin McCarthy at a meeting held this Monday to extend the US debt ceiling/AFP

President Joe Biden joined Kevin McCarthy at a meeting held this Monday to extend the US debt ceiling/AFP

Major stock markets and investors remain skeptical of US debt ceiling talks between Democratic President Joe Biden and Republican leader Kevin McCarthy to avoid an imminent default. Yesterday, after waiting for several hours, we learned that the talks had ended again without an agreement.

“We have been able to have productive discussions. declared when leaving

Negotiations to revise the spending cap have stalled between Mr. Biden and the House of Representatives for weeks, and the president has also postponed trips to Australia and Papua New Guinea scheduled to resume talks after the G7 meeting in Japan.

deadline.

Treasury Secretary Janet Yellen has made it clear what’s at stake: It’s “extremely likely” that federal funds will dry up after June 1st.

Biden and McCarthy, who have already met twice in two weeks with other lawmakers, met face-to-face on Monday. The meeting was the backdrop to a heated debate this weekend between officials from both parties in the absence of Biden, who is in Japan for the G7 summit.

To eliminate the risk of default, Congress needs to approve a higher public debt ceiling. The Senate is controlled by Democrats and the House is controlled by Republicans.

Republicans have called for drastic cuts in public spending as a condition of more borrowing, opposed by Mr. Biden, who is seeking re-election in 2024 on promises of social justice.

Before the meeting, Mr. McCarthy said he was quite optimistic. “The content of the negotiations will be viewed by a majority of Republicans as the right solution to put us on the right track,” he asserted on CNN.

Mr. Biden has made it clear that he is in favor of reducing the budget deficit and believes we need to “consider the fiscal space and make sure the wealthy pay their fair share of taxes.”

What’s in the game?

The so-called “debt ceiling” of over $31 trillion, a world record, was reached a few months ago, but the federal government has so far managed the situation through fiscal manipulation.

If the U.S. fails to meet its obligations, it will no longer be able to pay holders of U.S. Treasuries, the haven of global finance. For example, the government could not pay benefits or veterans’ pensions.

Economists warn that the impact on the global economy will be devastating. “America has never defaulted, and it will never,” Biden said.

Decisions made at the last minute can have consequences. In 2011, there was nothing but the threat of default, which caused the US to lose its valuable triple-A credit rating for the first time. the highest rating agency.

Source: Diario.Elmundo

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