Some of the world’s top bankers are warning of “catastrophic” consequences that could start as early as next week should the government default on its debts.
Deutsche Bank chief executive Anshu Jain said, while speaking at a conference hosted by the Institute of International Finance in Washington, “This would be a very rapidly spreading, fatal disease.” He warned that the consequences of an American default would be “utterly catastrophic,” and would plunge the world into at the very least another recession.
As we reported earlier this week, banks around the country are starting to stockpile huge amounts of paper currency in fear of a major run on U.S. Banks in the coming weeks.
On Saturday, JPMorgan Chase chief executive Jamie Dimon confirmed the stockpiling of cash, when he said banks are spending “huge amounts” of money and making “enormous preparations” preparing for the possibility of a default.
After President Obama rejected the latest congressional offer to temporally extend the debt limit while they negotiate on the budget, The U.S. Treasury Department is claiming they could default as early as next week, and say they won’t be able to prioritize payments on U.S. debt over obligations like Social Security.
In my opinion, these are scare tactics, especially when you consider the government has more than enough money to pay the interest on the debt, while still making social security payments. But scare tactics or not, it seems we are again heading for some very troubling economic times.
Our system is built on top of a perceived value in our paper currency; once the American people lose confidence in its value, the system crashes like a house of cards. Whether the default’s actually as catastrophic as these bankers are warning really isn’t the problem, the problem comes in how the country reacts to these warnings.