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.

Source link

Federal Reserve Bank of Atlanta’s president has warned of disastrous economic consequences similar to those seen during the financial crisis of the 1970s if the Fed loosens its policy prematurely. Noting that “inflation remains too high,” he stressed: “We don’t want a repeat, so we must defeat inflation now.”

Fed Officials on Rate Hikes and Inflation Fight

The president of the Federal Reserve Bank of Atlanta, Raphael Bostic, warned about “disastrous” economic consequences should the Fed loosens its policy prematurely in an essay published by the Atlanta Fed on Wednesday.

“I believe inflation remains too high,” he wrote, emphasizing the need for the Federal Open Market Committee (FOMC) to raise interest rates more aggressively. Commenting on a narrative that the Federal Reserve should consider “reversing its course of raising the federal funds rate lest we go too far and cause undue economic hardship,” Bostic opined:

While that perspective is understandable, history teaches that if we ease up on inflation before it is thoroughly subdued, it can flare anew. That happened with disastrous results in the 1970s.

“After the FOMC loosened policy prematurely, it took about 15 years to bring inflation under control, and then only after the federal funds rate hit 20%,” the Atlanta Fed president warned. “We don’t want a repeat, so we must defeat inflation now.”

Bostic continued, “Now we must determine when inflation is irrevocably moving lower,” elaborating:

We’re not there yet, and that is why I think we will need to raise the federal funds rate to between 5% and 5.25% and leave it there until well into 2024.

“This will allow tighter policy to filter through the economy and ultimately bring aggregate supply and aggregate demand into better balance and thus lower inflation,” he said.

Federal Reserve Bank of Minneapolis’ president, Neel Kashkari, also talked about interest rate hikes at a business event in Sioux Falls on Wednesday. Kashkari said he is “open-minded” about whether the Fed will raise interest rates by 25 or 50 basis points at the next FOMC meeting. Citing last month’s data of “higher inflation than we expected and a strong jobs report,” Kashkari said:

These are concerning data points suggesting we’re not making progress as quickly as we’d like.

However, he cautioned against overreacting to “one month of data even if the data is troubling.”

Do you think the Fed should be more aggressive in hiking interest rates to fight inflation? 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.