Mohamed El-Erian said the US debt-ceiling deadlock threatens more than Americans’ economic well-being. “It also risks undermining further the country’s international reputation for sound economic management,” he said in a tweet. Lawmakers have been sparring over the debt ceiling for months, despite the risk that the government could run out of money. Loading Something is loading.
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As the political standoff over the US borrowing limit drags on, investor anxiety is rising about the risk of a sovereign debt default and the potential negative consequences of such an event.
Top economist Mohamed El-Erian has weighed in on the impasse, which has already prompted several experts to warn of the serious economic and financial risks it poses.
“The US #DebtCeiling saga threatens more than the economic well-being of Americans and their financial stability,” the former PIMCO CEO said in a Tuesday tweet.
“It also risks undermining further the country’s international reputation for sound economic management at a time when many are looking for the US to re-establish its constructive role on the global economic/financial stage,” he added.
For months, lawmakers have been sparring over whether to raise the debt limit or not after the US hit its $31.4 trillion ceiling on January 19. The debate has elevated worries about the risk of a US default given the Treasury is set to run out of money by June 1, according to some estimates, if Congress don’t act.
Treasury Secretary Janet Yellen has made multiple dire warnings if the US defaults on its debt – saying it could “break” financial markets and lead to an “economic and financial storm.”
There could be a stock-market disaster if US lawmakers don’t vote to lift the debt ceiling soon, Goldman Sachs CEO David Solomon, Morgan Stanley boss James Gorman, and 142 other top execs said in an open letter addressed to president Joe Biden and congressional leaders.
El-Erian previously noted that the US debt ceiling is one of four factors that will determine the future of the global economy, along with the Federal Reserve’s efforts to reduce high inflation.
President Joe Biden on Tuesday met with Speaker of the House Kevin McCarthy, House Minority Leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer, and Senate Minority Leader Mitch McConnell for the second time to attempt to settle a solution to raise the debt ceiling.