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Top executives from 146 major companies in the U.S. — including Morgan Stanley, Goldman Sachs, Nasdaq, and Pfizer — have urged President Joe Biden and congressional leaders to act swiftly to prevent the U.S. from defaulting on its debt, which could occur as early as June 1. They warned of “potentially disastrous consequences” if the U.S. defaults on its debt obligations.

Executives Warn of ‘Disastrous Consequences’ From US Default

A total of 146 executives from major companies in the U.S. have jointly written an open letter to President Joe Biden and congressional leaders urging them to take swift action to save the U.S. from defaulting on its debt obligations.

Among the letter signers are Goldman Sachs CEO David Solomon, Morgan Stanley CEO James Gorman, Nasdaq CEO Adena Friedman, Guggenheim Partners Executive Chairman Alan Schwartz, and Pfizer CEO Albert Bourla.

Addressing President Biden, Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, House Speaker Kevin McCarthy, and House Minority Leader Hakeem Jeffries, the executives wrote:

We write to emphasize the potentially disastrous consequences of a failure by the federal government to meet its obligations. Absent a resolution, the government is likely to run out of money as soon as June 1. Action to end the pending debt crisis is necessary now.

“Failure to resolve the current impasse could easily have more negative consequences,” they continued. “Although the American economy is generally strong, high inflation has created stresses in our financial system, including several recent bank failures.”

The executives added: “Much worse will occur if the nation defaults on our debt obligations, which would weaken our position in the world financial system. Large amounts of our $31 trillion debt are held by pension funds, individuals, and other governments.” They noted:

The inability to incur new debt would also threaten the government’s ability to pay its other bills, potentially including some payments to Social Security or Medicare recipients. This cannot be allowed to happen.

“We strongly urge that an accord be reached quickly so that the country can avert this potentially devasting scenario,” they concluded.

U.S. Treasury Janet Yellen has warned that the Treasury may not be able to pay all of the government’s bills as early as June 1. The Congressional Budget Office similarly estimated that the U.S. could default on its debt obligations in the first two weeks of June.

However, President Biden is “confident” that he can reach a deal with Republicans on the debt ceiling. Meanwhile, a group of Senate Democrats is reportedly circulating a letter urging him to prepare to invoke the 14th amendment to unilaterally resolve the debt ceiling standoff.

“I’m confident we’ll get the agreement on the budget and America will not default … We’re going to come together because there’s no alternative way to do the right thing for the country. We have to move on,” Biden said Wednesday. Former President and 2024 presidential candidate Donald Trump recently urged Republican lawmakers to let the U.S. default on its debt if the Democrats do not agree to spending cuts.

What do you think about 146 executives urging President Joe Biden and congressional leaders to act swiftly to prevent the U.S. from having to default on its debt obligations? Let us know in the comments section below.

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This is an opinion editorial by Robert Hall, a content creator and small business owner.

If you follow U.S. politics, you understand that the country is on the brink of defaulting on its massive $31 trillion debt.

At the crux of the issue is that there are Republicans in one corner, who control the House of Representatives with a slim 222 to 213 majority. In the other corner, the U.S. Senate and the White House, under Joe Biden, are controlled by Democrats.

Both parties are diametrically opposed to what the other wants. Republicans want to significantly cut spending in order to raise the debt limit for a year. Democrats want a “clean” debt ceiling bill passed without strings attached. As you can see, both parties’ starting positions are nowhere near each other. Ultimately, this has turned into a game of chicken based on who will blink first. It’s all very tiring.

Is this the way a government should be run? It is absolutely crazy that these leaders would risk defaulting on money that has already been spent. This is like if you or I whipped out a credit card, went crazy buying all kinds of stuff, and did not make the monthly payment at the end of the month.

The government has been able to run up the debt for a long time because it has had willing participants, such as pension funds, hedge funds, sovereign wealth funds and regular joes who lent them money by buying treasury bills because they believed they would be paid back with interest.

This has been the case for a long time, but now this arrangement is being called into question with the will they, won’t they bull going on in Congress right now.

Seriously Broke

Are these politicians so detached from reality to think that, once the debt limit is breached and people stop getting paid what is owed to them, people will go right back to loaning them money?

If they do, they will demand even higher interest rates. The government can’t even afford the rates we have now! What happens if the borrowing cost for the government goes to 10% or 15%? Ain’t nothing getting funded; I can tell you that much.

Check out this: The federal government spent a record $475 billion on interest payments in fiscal year 2022. Interest costs grew 30% last year and are poised to jump another 35% this year, according to the Congressional Budget Office’s (CBO’s) own estimate!

The CBO believes the federal government will spend $640 billion in interest payments this year alone. Is this the debt spiral that James Lavish has been talking about lately? It sure as hell seems like it to me.

We are on a slow-motion collision course with the economic reality that you can’t print and borrow money without consequences. Inflation rears its ugly head first, and then people realize the money they are being paid back with has diminished purchasing power. Once people know they are losing money when they lend it to the federal government, it’s game over.

This debt-ceiling debate will highlight the dysfunction of the federal government and its inability to keep its promises. This is what surprises me about the politicians on both sides of the aisle.

Do they really want to show this level of incompetence to the world? It’s like watching your family fight in the front yard. It’s embarrassing as hell and will change the perception that your neighbors have about your family.

A debt default will change the perception of the U.S. from a trusted payer to a debt junkie unable to pay its debts.

How Is Default Good For Bitcoin?

The silver lining to this whole debt-ceiling debacle is that it’s going to throw rocket fuel on the price of bitcoin. As people see that their money is no longer “safe” with the federal government, they will seek an alternative to U.S. treasuries. Undoubtedly, some of the dollars that would have been earmarked for treasuries will flow into bitcoin.

New entrants to bitcoin will see that it is the safe haven asset they were looking for the whole time. There is no counterparty risk, and the supply can’t be diluted.

During the last contentious debate over the debt ceiling, under the Obama administration, the price of bitcoin went from $13 and ended the year at $755. It also reached an all-time high of $1,163 that year. Coincidence? Maybe, but it does make sense for people to protect their wealth during times of potential calamity such as a default.

So, I say to the politicians running the government right now: Go ahead and keep playing these games. Default or don’t default because, in the end, it doesn’t matter; you still lose. You have led the world to ruin, and it will be up to Bitcoin to save humanity from itself. The debt-ceiling debacle only accelerates the inevitable.

And to the Bitcoiners: Keep stacking them sats like your lives depend on it, because one day they might.

This is a guest post by Robert Hall. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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Harvard economics professor Kenneth Rogoff, who previously served as the chief economist at the International Monetary Fund (IMF), has warned that the U.S. defaulting on its debt obligations could spark a global financial crisis. “It’s a very perilous situation and we are in unknown waters,” he warned.

Harvard Professor of Economics Kenneth Rogoff on U.S. Default and Global Financial Crisis

Harvard economics professor Kenneth Rogoff shared his view on the U.S. economy, a possible U.S. default, and a global financial crisis in an interview with ET editor Srijana Mitra Das, published Thursday. Rogoff is a professor of Economics and Maurits C. Boas Chair of International Economics at Harvard University. From 2001–2003, he served as Chief Economist and Director of Research at the International Monetary Fund (IMF).

He was asked whether the current U.S. debt crisis and its potential default could “bring back the risks of a global recession.” Rugoff replied:

Absolutely. The risks exist anyway but if this worsens, it could pose a global financial crisis. I hope it won’t come to that — but it’s a very perilous situation and we are in unknown waters.

“Generally, when you navigate government spending, you consider one bill at a time. You look over all its details and then negotiate how to work these out,” he explained. However, he stressed that the Republicans are trying to get everything all at once, emphasizing that “No country runs its fiscal policy that way.”

He cautioned: “Typically, these negotiations do get resolved at midnight but there is a two to three percent chance at the moment here that we will discover what a U.S. default looks like.”

How the U.S. ‘Defaulted’ in the Past

Rogoff further detailed that the U.S. has “defaulted” in the past but “in a different way.” One example was in the early 1930s when American debt used to be payable in gold. President Franklin Roosevelt changed the gold price from $20 to $35. “We defaulted on the gold clause while we paid the debt in dollars, which was worth a lot less,” the Harvard professor noted.

Another example was “after the Revolutionary War when the U.S. was forming,” the economics professor described. “Alexander Hamilton, the first secretary of the U.S. Treasury, only paid some of the inherited colonial debt,” Rugoff explained, adding:

We’ve also had high inflation recently — so, if you’re a U.S. debt holder, the value of your holding has reduced markedly in the last two years. That is a kind of default since you weren’t expecting the loss of value but it is much less disruptive than this situation which is like facing a black hole.

U.S. Treasury Secretary Janet Yellen has said that the Treasury may not be able to pay all of the government’s bills as early as June 1 “if Congress does not raise or suspend the debt limit before that time.” However, some believe that raising the debt ceiling will make the problem worse, including economist Peter Schiff.

Like Yellen, the Congressional Budget Office similarly warned that the government could default on its debt in the first two weeks of June. The IMF cautioned last week that a U.S. default would have “very serious repercussions.” Meanwhile, former President and 2024 presidential candidate Donald Trump has urged Republican lawmakers to let the U.S. default on its debt if the Democrats do not agree to spending cuts.

Do you agree with Harvard economics professor Kenneth Rugoff? Let us know in the comments section below.

Kevin Helms

A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.