World News

    US Warns of 'Catastrophic' Effect If It Defaults

    The U.S. Treasury is warning there could be "catastrophic" economic effects worldwide if Congress does not increase the country's borrowing limit in the coming days so the United States does not default on its financial obligations.

    As the U.S. approaches its current $16.7 trillion debt ceiling, the Treasury issued a report Thursday outlining the calamity it says could occur if it runs out of money to pay the country's bills, including interest on money the U.S. has borrowed overseas.

    "A default would be unprecedented," Treasury said, "and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse."

    The country's government is already in the third day of a partial shutdown in a spending impasse between President Barack Obama, a Democrat, and his Republican opponents in Congress. Mr. Obama said Congress needs to act quickly to avert a new crisis over the debt ceiling, which the country could reach on October 17.



    "You know the United States is the center of the world economy. So, if we screw up, everybody gets screwed up. The whole world will have problems, which is why generally nobody has ever thought to actually threaten not to pay our bills. It would be the height of irresponsibility."



    Mr. Obama and Speaker John Boehner, leader of the Republican-controlled House, are locked in a stalemate over government spending priorities. But Boehner has been telling Republican colleagues in recent days that he will do whatever is necessary to avoid a default, even if he needs votes from Democratic lawmakers to help raise the borrowing limit.

    The U.S. and Denmark are the only democratic countries in the world that have imposed a debt ceiling, with other nations choosing to borrow what they need to finance their operations without a prescribed limitation. A business professor at the University of Michigan, Erik Gordon, told VOA that the U.S. has attempted, without much success, to curb its spending.



    "It can't discipline itself without spending money. It spends money like a drunken sailor. So Congress imposed a debt ceiling in an attempt to impose some discipline on itself, by saying, you can spend money, but not so much that you breach this ceiling."



    The U.S. debt ceiling has been increased more than 100 times in the last century, sometimes rather routinely, other times after extended debate, with lawmakers from the political party that does not control the White House often accusing the country's leader of reckless spending.

    Mr. Obama now says he wants Congress to increase the borrowing limit without negotiating over the country's spending and taxation policies with his Republican opponents. But as a U.S. senator, Mr. Obama voted against an increase in the debt ceiling when a Republican, George W. Bush, was president.

    The chief executive of the huge U.S. investment bank Goldman Sachs, Lloyd Blankfein, met with Mr. Obama at the White House this week along with other key banking executives. Blankfein said it is imperative that the United States does not default on its financial obligations.



    "There's precedent for a government shutdown. There's no precedent for default. We're the most important economy in the world. We're the reserve currency in the world. Payments have to go out to people - if money doesn't flow in, then money doesn't flow out. So we really haven't seen this before, and I'm not anxious to be a part of the process that witnesses it."



    Michigan business professor Gordon says no one knows what would happen if the U.S. were to run out of money to pay its bills and the debt ceiling is not increased.



    "Nobody knows what will happen if it's actually breached, because it's never come to that. But the fear is that it will destroy the country's status as the safe harbor for investments, that you won't know whether your U.S. government bonds will be paid on time or not. That's virtually unthinkable."



    He said even the threat of the U.S. defaulting would have "huge effects worldwide" on investors' confidence in the government's securities.

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Ivorian Chocolate Makers Promote Locally-made Chocolatei
    X
    July 29, 2016 4:02 PM
    Ivory Coast is the world's top producer of cocoa but hardly any of it is processed into chocolate there. Instead, the cocoa is sent abroad to chocolate makers in Europe and elsewhere. This is a general problem throughout Africa – massive exports of raw materials but few finished goods. As Emilie Iob reports from Abidjan, several Ivorian entrepreneurs are working to change that formula - 100% Ivorian chocolate bar at a time.
    Video

    Video Ivorian Chocolate Makers Promote Locally-made Chocolate

    Ivory Coast is the world's top producer of cocoa but hardly any of it is processed into chocolate there. Instead, the cocoa is sent abroad to chocolate makers in Europe and elsewhere. This is a general problem throughout Africa – massive exports of raw materials but few finished goods. As Emilie Iob reports from Abidjan, several Ivorian entrepreneurs are working to change that formula - 100% Ivorian chocolate bar at a time.
    Video

    Video Tesla Opens Battery-Producing Gigafactory

    Two years after starting to produce electric cars, U.S. car maker Tesla Motors has opened the first part of its huge battery manufacturing plant, which will eventually cover more than a square kilometer. Situated close to Reno, Nevada, the so-called Gigafactory will eventually produce more lithium-ion batteries than were made worldwide in 2013. VOA's George Putic reports.
    Video

    Video Polio-affected Afghan Student Fulfilling Her Dreams in America

    Afghanistan is one of only two countries in the world where children still get infected by polio. The other is Pakistan. Mahbooba Akhtarzada who is from Afghanistan, was disabled by polio, but has managed to overcome the obstacles caused by this crippling disease. VOA's Zheela Nasari caught up with Akhtarzada and brings us this report narrated by Bronwyn Benito.
    Video

    Video Hillary Clinton Promises to Build a 'Better Tomorrow'

    Democratic presidential candidate Hillary Clinton urged voters Thursday not to give in to the politics of fear. She vowed to unite the country and move it forward if elected in November. Clinton formally accepted the Democratic Party's nomination at its national convention in Philadelphia. VOA national correspondent Jim Malone has more.
    Video

    Video Trump Tones Down Praise for Russia

    Republican presidential candidate Donald Trump is toning down his compliments for Russia and Vladimir Putin as such rhetoric got him in trouble recently. After calling on Russia to find 30.000 missing emails from rival Hillary Clinton, Trump told reporters he doesn't know Putin and never called him a great leader, just one who's better than President Barack Obama. Putin has welcomed Trump's overtures, but, as Zlatica Hoke reports, ordinary Russians say they are not putting much faith in Trump.
    Video

    Video Uganda Unveils its First Solar-powered Bus

    A solar-powered bus described by its Ugandan makers as the first in Africa has made its public debut. Kiira Motors' electric bus, Kayoola, displayed recently at a stadium in Uganda's capital. From Kampala, Maurice Magorane filed this report narrated by Salem Solomon.
    Video

    Video Silicon Valley: More Than A Place, It's a Culture

    Silicon Valley is a technology powerhouse and a place that companies such as Google, Facebook and Apple call home. It is a region in northern California that stretches from San Francisco to San Jose. But, more than that, it's known for its startup culture. VOA's Elizabeth Lee went inside one company to find out what it's like to work in a startup.
    Video

    Video Immigrant Delegate Marvels at Democratic Process

    It’s been a bitter and divisive election season – but first time Indian-American delegate Dr. Shashi Gupta headed to the Democratic National Convention with a sense of hope. VOA’s Katherine Gypson followed this immigrant with the love of U.S. politics all the way to Philadelphia.
    Video

    Video Dutch Entrepreneurs Turn Rainwater Into Beer

    June has been recorded as one of the wettest months in more than a century in many parts of Europe. To a group of entrepreneurs in Amsterdam the rain came as a blessing, as they used the extra water to brew beer. Serginho Roosblad has more to the story.
    Video

    Video Commerce Thrives on US-Mexico Border

    At the Democratic Convention in Philadelphia this week, the party’s presumptive presidential nominee, Hillary Clinton, is expected to attack proposals made by her opponent, Republican presidential nominee Donald Trump, to build a wall along the U.S.-Mexico border. Last Friday, President Barack Obama hosted his Mexican counterpart, President Enrique Peña Nieto, to underscore the good relations between the two countries. VOA’s Greg Flakus reports from Tucson.
    Video

    Video Film Helps Save Ethiopian Children Thought to be Cursed

    'Omo Child' looks at effort of African man to stop killings of ‘mingi’ children
    Video

    Video London’s Financial Crown at Risk as Rivals Eye Brexit Opportunities

    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.

    Special Report

    Adrift The Invisible African Diaspora