Bank of America CEO Brian Moynihan said Monday that he is preparing for a possible default on the US government debt.
This situation has immeasurable destructive potential on the international financial markets, although it is expected to be avoided after tense and lengthy negotiations.
The CEO of the second-largest US banking firm warns that the Democrat administration is not undertaking austere fiscal measures but rather the opposite and refuses to allow constructive negotiation with the political opposition.
“We have to be prepared for that, not just in this country but in other countries worldwide. You hope it doesn’t happen, but hope is not a strategy, so you prepare for it,” Moynihan said in a dialogue with CNN.
President Joe Biden’s administration is pushing for a rapid lifting of the public debt ceiling, which has already reached the limit set at US$31.4 trillion.
At the same time is proposing to add US$4.8 trillion to the fiscal deficit until 2031.
The increases in budgeted spending over the next few years are not matched by increases in the tax burden or offsetting reductions in other spending items (as was the case, for example, in the 1990s).
The Republican opposition, both in the Senate led by Mitch McConnell and in the House of Representatives led by Kevin McCarthy, offers a constructive negotiation with the government.
They propose to approve lifting the public debt ceiling in exchange for allowing the adjustment of public spending, as occurred during the Clinton administration.
The Democrats still resist the negotiation and jeopardize the federal government’s credibility.
“Defaulting on our debt is not an option. But neither is a future of higher taxes, higher interest rates, and an economy that is not working for American workers,” announced Kevin McCarthy.
Treasury Secretary Janet Yellen took extraordinary measures to meet maturities and current short-term expenses and tried to reassure markets that the US has never defaulted on its financial obligations since 1789.
Yellen’s statements are inaccurate, to say the least.
The country defaulted on its commitments on numerous occasions, sometimes for force majeure in the face of war (1834 and 1862) and on other occasions due to the repudiation of dollar convertibility regimes (as in 1933 and more recently since 1971).
The suspension of payments in the current fiat currency has not happened so far, but the fiscal situation in the United States has been atypical for the last 15 years.
The federal government has never returned to a primary surplus since April 2008, and the public debt stock is at its highest level since World War II.
With information from Derecha Diario