The US Debt Crisis has been making headlines worldwide, and it seems like the situation is only going to get worse. According to Harvard economics professor Kenneth Rogoff, the US defaulting on its debt obligations could lead to a global financial crisis. In this article, we take a closer look at Rogoff’s warnings and explore the potential consequences of a US default.

US Debt Crisis: A Perilous Situation

Kenneth Rogoff has warned that the US is in “unknown waters” due to the current debt crisis. He explains that negotiating government spending involves looking at one bill at a time, but Republicans are trying to get everything at once. Rogoff stresses that no country runs its fiscal policy that way, and it could lead to dangerous consequences.

He elaborates that a US default could pose a global financial crisis, and it’s a very perilous situation. Rogoff hopes that it won’t come to that, but the risks already exist, and they could worsen if the situation isn’t resolved soon.

Past Instances of US Default

Rogoff points out that the US has defaulted in the past but in different ways. In the early 1930s, American debt used to be payable in gold, and President Franklin Roosevelt changed the gold price from $20 to $35, leading to a default on the gold clause. The US paid the debt in dollars, but it was worth much less due to inflation.

Another instance was after the Revolutionary War when the US only paid some of its inherited colonial debt. Rogoff explains that the high inflation in recent years has reduced the value of US debt holdings, leading to a kind of default. However, he stresses that the current situation is much more disruptive, like facing a black hole.

Potential Consequences of a US Default

The US Treasury Secretary, Janet Yellen, has warned that the Treasury may not pay all of the government’s bills from June 1st if Congress doesn’t raise or suspend the debt limit. However, economist Peter Schiff believes that raising the debt ceiling will only make the problem worse.

The Congressional Budget Office has also cautioned that the government could default on its debt in the first two weeks of June. The IMF has warned that a US default would have “very serious repercussions,” and former President Donald Trump has urged Republican lawmakers to let the US default on its debt if Democrats don’t agree to spending cuts.

The potential consequences of a US default could be catastrophic, leading to a global financial crisis. It could affect every aspect of the economy, from stock markets to commodities, basic necessities, and employment rates. In conclusion, the US Debt Crisis is a serious matter that needs to be handled delicately and urgently to avoid further damage.

Thus the US Debt Crisis is a severe issue that needs to be addressed promptly to avoid further damage. The potential consequences of a US default could be catastrophic, leading to a global financial crisis. Rogoff’s warnings must be taken seriously, and the government must take immediate action to prevent a US default.