Goldman Sachs Executive Warns of Risks Associated with U.S. Debt Default

Beth Hammack, co-head of Goldman Sachs’ Global Financing Group within the Investment Banking Division, has warned of the risks associated with the U.S. defaulting on its debt obligations. Hammack spoke out on Bloomberg Television, highlighting that international investors are perplexed by the U.S.’s unwillingness to pay its bills. She stated that the current situation is “confusing” and emphasized that there is a real risk to the U.S. dollar as negotiations continue.

Impact on U.S. Economy

The dislocations being created in the U.S. Treasury bill markets are inefficient and create extra cost for taxpayers, according to Hammack. The Treasury bill markets have begun to factor in the risks associated with the U.S. defaulting on its debt obligations from next month onwards. Hammack agrees with Treasury Secretary Yellen that the U.S. defaulting on its debt obligations would have “catastrophic consequences for the U.S. economy.” She also cautioned that there would be “a huge ripple effect” if the Treasury stops making some payments.

Risk to Reserve Currency Status

Hammack also warned that anything that moves the U.S. away from being viewed as the world’s reserve currency is bad for the American people, bad for the dollar, and bad for the U.S. government. Hammack, who serves as the chair of the U.S. Treasury Department’s Borrowing Advisory Committee, is not the only one to have raised concerns about this issue. A lawmaker has also warned that a default poses risks to the U.S. dollar’s reserve currency status. Federal Reserve Chairman Jerome Powell has also warned of “uncertain and adverse consequences” from the U.S. defaulting on its debt obligations.

In conclusion, there is a growing concern that the U.S. defaulting on its debt obligations would have catastrophic consequences for the U.S. economy. International investors are perplexed, and Hammack’s warning highlights the risks associated with the U.S. losing its reserve currency status. The dislocations being created in the U.S. Treasury bill markets are inefficient and create extra costs for taxpayers. It is vital that the U.S. government takes decisive action to avoid a default.