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The U.S. Capitol Building in Washington, DC., January 19, 2023. \/CFP<\/p>\n
The U.S. Capitol Building in Washington, DC., January 19, 2023. \/CFP<\/p>\n<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n
A number of Wall Street banks have warned that the United States is heading towards the riskiest debt ceiling crisis since 2011 which is likely to trigger a “severe recession.”<\/p>\n
Recurring standoffs over the U.S. debt limits this last decade have largely been resolved before they could ripple out into markets. However, the current standoff in Washington is worrying investors.<\/p>\n
The impact of a default is hard to predict, but could lead to a “serious recession,” the Financial Times quoted JPMorgan\u2019s chief U.S. economist Michael Feroli as saying.<\/p>\n
The U.S. government is facing the riskiest borrowing cap problem since 2011, at a time when the country has more debt and higher interest rates, Alec Phillips, Goldman Sachs\u2019 chief political economist told the newspaper.<\/p>\n
Maureen O’ Connor, global head of high-grade debt syndicate at Wells Fargo characterized the current debt ceiling issue as a Black Swan event.<\/p>\n
A missed debt payment would likely send shockwaves through global financial markets, as investors would lose confidence in Treasury’s ability to pay its bonds.<\/p>\n
A 2011 budget battle that took Washington to the brink of default prompted a stock sell-off and a first-ever downgrade of the United States’ top-tier credit rating.<\/p>\n
Goldman Sachs in a research note said the S&P 500 fell 15 percent during the 2011 crisis with stocks with the greatest sales exposure to U.S. federal spending plunging by 25 percent.<\/p>\n
Read more:<\/strong> Yellen warns U.S. would ‘undoubtedly’ see recession if it defaults on debt<\/a><\/p>\n