Donald Trump clashes with powerbrokers in Washington and on Wall Street yesterday as the US debt crisis deepens
Donald Trump clashed with power brokers in Washington and on Wall Street yesterday as the deepening US debt crisis deepened.
In a major intervention, the former president urged Republicans not to let the country pay its debts unless Democrats give in to demands for “massive” spending cuts.
The comments prompted a swift response from US Treasury Secretary Janet Yellen and JP Morgan banking boss Jamie Dimon amid warnings that such a move would be “catastrophic.”
The dispute revolves around the so-called US debt ceiling – the legal limit the government is allowed to borrow.
Showdown: Former US President Donald Trump and US Treasury Secretary Janet Yellen
The White House is in talks with the Republicans about raising the current ceiling of £25 trillion.
If an agreement is not reached, the US could run out of money by early June, meaning it won’t be able to pay federal workers, the military, Social Security or health care.
The acrimonious stalemate in Washington could also lead to the US defaulting on its debts, as Trump is advocating despite warnings of global market panic and another economic downturn.
The former president and current frontrunner for the 2024 Republican nomination for the White House fanned the flames of the crisis and pressured his party to ask for major concessions from President Joe Biden before agreeing to a raise.
He warned that the US government is “spending money like drunken sailors,” saying, “I’m saying to the Republicans out there, if they don’t give you massive cuts, you’re going to have to default.
“We have to save this country. Our country is being destroyed by stupid people, by very stupid people.’
Trump shrugged off his concerns about a default, saying, “It’s really psychological more than anything else.”
“And it could be really bad, it might be nothing, maybe it’s a bad week, or a bad day, who knows?”
The comments prompted a scathing response from Dimon, who warned that the deepening crisis could trigger “panic” in financial markets.
“It’s one more thing he doesn’t know much about,” Dimon said in an interview with Bloomberg Television. He revealed that JP Morgan has set up a “war room” to prepare for a default, adding, “Anyone who is anyone knows this is potentially catastrophic.”
Speaking ahead of a meeting of G7 finance ministers in Japan, Yellen said: “Bankruptcy would threaten the profits we have worked so hard for over the past few years in our recovery from the pandemic. And it would cause a global downturn that would take us much further back.”
Yellen, a former president of the Federal Reserve, urged Congress to raise the ceiling so that the government can borrow more — or “risk undermining US global economic leadership and raise questions about our ability to defend our national security interests’.
The International Monetary Fund (IMF) joined the row, warning that failure to raise the debt ceiling would have “very serious consequences” for the US and the global economy, including higher borrowing costs.
“We strongly encourage the parties to come together to reach a consensus to urgently address this issue,” said IMF director of communications Julie Kozack.