Moral Outrage
Whew! God help us!

IMF warns US debt ceiling delay will damage world economies

The International Monetary Fund urged the United States to swiftly raise the debt ceiling to ward off risks of a credit downgrade that could damage the global economy.

Facing an August 2 deadline after which the United States may not be able to issue more debt, both sides have so far refused to compromise on how to lift the $14.3-trillion legal borrowing limit and come to grips with spending and tax issues.

The IMF, which held talks with senior administration officials while preparing its assessment, clearly opted for a broad-based plan over stop-gap measures. It said some action to rein in debts must start on October 1, or the United States will face a disruptive loss of credibility.

IMF staff said risks to the U.S. outlook were rising. Those include the possibility of a sudden increase in interest rates or a sovereign downgrade in U.S. debt — basically a decision by ratings agencies to rank the United States as less creditworthy — if agreement to raise the debt ceiling and install a medium-term plan for debt reduction.

“These risks would also have significant global repercussions, given the central role of U.S. Treasury bonds in world financial markets,” the IMF said.

An IMF official, briefing reporters by telephone, said that if the United States’ AAA debt rating was downgraded it could be “extremely damaging” for the U.S. and world economy.

[Reuters]

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One Response to “IMF warns US debt ceiling delay will damage world economies”

  1. There are advantages to having a stable, safe, and deep debt market. The problem is our debt market has become too deep.


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