The Strategist

Goldman Sachs warns of US default threat

10/08/2021 - 07:30

Goldman Sachs has warned clients that Congress is unlikely to resolve the debt ceiling issue before October 18, risking the first default in US history, reports CNN.

"It seems unlikely that Congress will tackle the debt ceiling issue until the last minute, and the risk that it won't take necessary action before the October 18 deadline is real," the bank's economists said in a letter to its clients. The channel stresses that the warning was sent out to the bank's clients before the Senate Republican Minority Leader Mitch McConnell announced on Wednesday evening that his party would not prevent the extension of the national debt limits to avoid a first-ever US default.

As Goldman Sachs warns its clients, "the loss of borrowing authority poses a real risk", but economists estimate it is likely to be short-lived.

The US administration is calling on Congress to raise or cancel the borrowing ceiling immediately and warns that otherwise the ability to service financial obligations will be exhausted as early as 18 October.

Earlier, US Treasury Secretary Janet Yellen warned that the US could be in danger of default by 18 October if Congress does not vote to raise the limit on government debt.

A bill to abolish government borrowing limits by the end of 2022 is pending in the Senate, but Republicans have previously threatened to block approval of the initiative, which was previously approved by the House of Representatives. They oppose the Democrats' new multi-trillion-dollar social and economic initiatives and call for the debt to be kept within its previous limits.