US borrowing crisis 'days away' from danger, says World Bank head


Jim Yong Kim: "We are now five days away from a very dangerous moment"

The president of the World Bank, Jim Yong Kim, has warned that the United States is just "days away from a very dangerous moment" because of the government's borrowing crisis.

He urged US policymakers to reach a deal to raise the government's debt ceiling before Thursday's deadline.

The US Treasury will start to run short of funds if no agreement is reached for it to borrow on financial markets.

Mr Kim warned this could be a "disastrous event" for the world.

"The closer we get to the deadline the greater the impact will be for the developing world.

"Inaction could result in interest rates rising, confidence falling and growth slowing," said Mr Kim, speaking at the World Bank's annual meeting in Washington.

Start Quote

There are three examples in US history that come close to default, with the most recent occurring in 1979”

End Quote

"If this comes to pass it could be a disastrous event for the developing world and that will in turn greatly hurt the developed economies as well," he added.


If the US does run short of cash, this could cause it to default on its debts, a development which would be likely to have a severe effect on financial markets around the world.

The BBC's Andrew Walker said that finance ministers from other countries think the US probably won't default, but they are uneasy and want the crisis resolved very soon.

Republicans and Democrats failed to come to an agreement on Saturday, but Senator Dick Durbin, a Democrat, said the aim was to reach a deal on extending the debt limit before markets reopen on Monday.

The White House rejected a deal for a short-term increase to the borrowing limit.

"It wouldn't be wise, as some suggest, to just kick the debt ceiling can down the road for a couple of months, and flirt with a first-ever intentional default right in the middle of the holiday shopping season," said President Barack Obama.


The US government has been in partial shutdown since Congress missed a 1 October deadline to pass a budget, with politicians being unable to agree funding for current spending.

This has resulted in hundreds of thousands of federal employees being sent home and government offices closing.

Arizona Governor Jan Brewer announces the reopening of the Grand Canyon National Park

Republicans refused to approve the new budget unless President Obama agreed to delay or eliminate the funding of the healthcare reform law of 2010.

US Treasury Secretary Jack Lew has estimated that each week the government is shut down, 0.25% is shaved off economic growth, which was already expected to be a sluggish this quarter.

Debt burden

Mr Lew has also has warned that letting talks over the debt ceiling go down to the wire "could be very dangerous".

The current debt limit of $16.699 trillion was reached in May.

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It would ripple through the world economy in a way that you couldn't possibly understand”

End Quote Jamie Dimon Chief executive, JP Morgan

Since then the US Treasury has been using what are called extraordinary measures to keep paying the bills, but those measures run out on 17 October.

Every week, the Treasury also has to refinance $100bn worth of debt in the form of US government bonds known as treasuries.

The US also has to pay interest on its huge debt burden.

An inability to pay that interest, or pay back debt if required, would put the US into default.

On Saturday, Jamie Dimon, boss of the American bank JP Morgan said the possible repercussions did not bear thinking about.

"You don't want to know [what would happen]," he said.

"It would ripple through the world economy in a way that you couldn't possibly understand."



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  • rate this

    Comment number 546.

    The question that is concentrating our minds right now is: Are the delinquent Republicans going to hold the world to ransom just because they cannot accept the results of the last Presidential election? Are they democratic or not? Are they so concerned about the loss of their stranglehold over the medical well-being of the people of the USA that they are prepared to damage the world economy?

  • rate this

    Comment number 545.

    495. What they dont want is a overblown corrupt socialist agenda going on in their country. They believe that everyone can work and make a life for themselves and are responsable for themselves.
    This is the American dream! If you are poor you can work your was out of it yourself, they do not believe in handouts by the Government. There is no such thing as free healthcare, we all have to pay here.

  • Comment number 544.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 543.

    523 Anglerfish
    Comparing household and national budgets as if they operate by the same rules is a politician's trick.

    Well said. This has been a particular trick used by successive Tory Gov'ts as an explanation for shrinking the Public sector and savaging services.

  • rate this

    Comment number 542.

    The way the US handles the worlds financial markets and crisis is nothing to the way the Chinese will eventually do. Before this happens perhaps they should create a different currency measure away from the $ to a basket of currencies ASAP. This is an old idea but its time it is implemented. The only thing is who will take the lead to initiate it.

  • rate this

    Comment number 541.

    #512 JfH

    "Capitalism can recover!"

    Adam Smith (Born 1723)

    -- has it ever existed ?

    --NO ! -- appears to be the answer !

    (if Adam Smith is used as the standard.)

  • rate this

    Comment number 540.

    for all if the people who cant stand the usa. And I fully understand why.
    remember we are people just like everyone else in the world with
    no control of our has become so corrupt from small town mayors all the way to the top it no longer represents the people

  • rate this

    Comment number 539.

    It's simple math really. If the percent borrowed against the GDP gets to high then it is a problem. The GDP has gone offshore, and is thus less of a cushion against borrowing. The future doesn't look to bright either.
    Hurting the world economy is a very real threat, and most likely will not bring jobs back to America.

  • rate this

    Comment number 538.

    Money helps to make trade more efficient.
    The current problem is that legal tender laws create a monopoly in currency that results in worthless fiat money.
    If money was treated as any other tradeable asset on the free market, then the only currencies that would succeed would be the properly backed ones, nothing like the current worthless fed reserve dollar.

  • rate this

    Comment number 537.

    Capitalism is open plan

    which can go right & wrong

    greed killed capitalism

    scam milking property and loans and interest and bundling them up as debt instruments to reduce risk was artificial superficial illogical assumption people who bought instruments for millions lost all

    Global Banks were suckered and collapsed accordingly
    Banks specialising in bonds & collateral management bought them

  • rate this

    Comment number 536.

    Americans always preach about the sense of fairness. I guess the entitlement to health care becomes increasingly dependent on one's wealth and income.

    Surely the provision of health insurance for poor people can ensure they are not handicapped by illnesses that might disable them from reaping more social and economic benefits? Better than handing the money to benefit only few people!

  • rate this

    Comment number 535.

    Truth logic sustainability the final frontiers "I've been hoarding lupins."

    Have you been sucking the seeds? (again!)

  • rate this

    Comment number 534.

    Everybody aware most country economies are debt based and driven by debt? Every note requires somebody to be in debt before it exists, no debt = no money supply. You have all been conned. Debt based economies run in cycles, meaning they ALWAYS collapse, it is completely inevitable. You are the debt slaves in this game and like most people I'm fed up of playing. At some point, the money runs out.

  • rate this

    Comment number 533.

    Why are they whackos tea party nutters banging on about raising debt ceilings when Reagan and Dubya hold the records for the number of times debt ceiling was increased?

    Hypocrisy that merely reaffirms their obsession with destroying Obama's Medicare reforms.

  • rate this

    Comment number 532.

    What worries me about this is that when America gets a cold we get flu.
    However, perhaps that's meant by the special relationship!

  • rate this

    Comment number 531.

    524.fuzzy "I'd argue capitalism doesn't even need money, just people free to trade goods and/or services."

    I've done bartering in the past. Swapping a ship load of tea for shirts and unless there is valuable money it is incredibly difficult to trade. Money must itself have a positive value and be a store of value to overcome the enormous problems with synchronising bartering. Just try it!

  • rate this

    Comment number 530.

    I think they should miss the deadline and then after that see how they can deal with a huge impact it will create. Let all the world see how stupid the US goverment really is (as well as all governments) they only thinking about their own pockets. I wouldnt be surprised if some of them have some bets on not reaching the deadline.

  • rate this

    Comment number 529.

    The president of the World Bank, Jim Yong Kim IS WRONG!
    He urged US policymakers to reach a deal to raise the government's debt ceiling before Thursday's deadline.
    The USA is already Bankrupt and have no possibility of ever paying off their titanic Debts You simply cannot have a Debt Ceiling if you have no Assets to cover your Debt.
    ....even a child could understand this............

  • rate this

    Comment number 528.

    Yawn .


    Who'd have em.

    The world existed before them.

    The world will exist without them.


    The world existed before money.

    The world will exist after money.

    The world existed before humans.

    The world will exist after humans.

    No matter, I've been hoarding lupins.

  • rate this

    Comment number 527.


    You appear to believe there is a choice, That returning to a real cost of money would lead to the system fixing itself

    News You can't impoverish 80% of the West's population. I will drag down the rich before my kids starve.

    If we turn our backs on our masters they will have to hide in a very deep hole.

    A new French Revolution could be messy,

    Our Masters do not sleep well (I Hope)


Page 33 of 60


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