Quick Search

Recession could be Caused by US Default

Recession

Chief of IMF Voices Concerns over US Default Causing Recession

Christine Lagarde, the head of the International Monetary Fund, has expressed concern that if the US does default on their debt, it could plunge the world into recession.

She was being interviewed for a US TV show when she said that if they do default, then it could cause 'massive disruption the world over'. 

If no agreement is reached to increase the US's debt limit, the US Treasury will begin to run out of money and a recession will be imminent.

The leaders of both the Democratic and the Republican parties held talks on Saturday, the first of their kind to take place in several weeks.
 
However, correspondents are taking a negative view on the outcome, saying it is unlikely that a breakthrough will occur in time to prevent recession.

When interviewed by the NBC programme Meet the Press, Christine Lagarde said that American would have to raise their debt ceiling before the deadline 

She was reported as saying that the uncertainty could cause severe problems, not just in the US around the world. Not only would it cause disruption, but it could also lead to another recession.
 

World Bank News

Jim Yong Kim, the president of the World Bank, has also issued warnings about the potential consequences of the situation and the threat of recession. He has expressed his concern that the US is only a few days away from a potentially very damaging situation.

The bank's president was eager for the policy makers in the US to reach some kind of agreement over the debt ceiling before the deadline warning, that a failure to do so could be a 'disastrous event' and cause global recession.

He expressed his concern over a potential drop in growth and confidence and a rise in interest rates, and he had particular worries about the developing world. 

International finance ministers don't believe that the US will default, but there is a general uneasiness about the potential impact of the crisis and the looming threat of recession.

After the White House rejected a deal for a short-term increase to the borrowing limit, it is now a race to reach an agreement. The partial shutdown of the US government has been in place since they failed to pass a budget and has meant thousands of federal employees have been sent home.

The shutdown could be costing the government dearly, with an estimate from the US Treasury Secretary suggesting that it could be shaving 0.25% off economic growth with every week it continues.

Written by David Archer of Circle Square - Financial Jobs London / Accountancy Jobs London

If you are looking for advice we have a dedicated career advice section. Our advice is not just generic recruitment advice we have tailored advice for each of the recruitment divisions
 

To contact one of our specialist financial recruitment consultants call 0207 492 0700 or email: jobs@circlesquare.co.uk   Connect with us on Google+ & Facebook

Join our groups on Linkedin:   London Accountancy Jobs      London Investment Banking Careers 

 

We use cookies to provide you with the best possible browsing experience on our website. You can find out more below.
Cookies are small text files that can be used by websites to make a user's experience more efficient. The law states that we can store cookies on your device if they are strictly necessary for the operation of this site. For all other types of cookies we need your permission. This site uses different types of cookies. Some cookies are placed by third party services that appear on our pages.
+Necessary
Necessary cookies help make a website usable by enabling basic functions like page navigation and access to secure areas of the website. The website cannot function properly without these cookies.
ResolutionUsed to ensure the correct version of the site is displayed to your device.
essential
SessionUsed to track your user session on our website.
essential
+Statistics
Statistic cookies help website owners to understand how visitors interact with websites by collecting and reporting information anonymously.
Google AnalyticsGoogle Analytics is an analytics tool to measure website, app, digital and offline data to gain user insights.
Yes
No

More Details