Just hours after the Fitch Ratings warned the US, a top Federal Reserve official stated that the US?s default would mean that the country will have to pay a severe price if the government misses bond payments. ?The US fiscal situations, if not handled correctly, could turn into a global macro shock?, James Bullard, President of St Louis Federal Reserve Bank said.
?The reverberations in those global markets would be severe. That?s where the real risk comes in?, he further added.
This came in soon after Fitch warned that it would slash the ratings on all US Treasury securities, if the government missed its debt payment by August 15 2011. There is a possibility that the ratings could go back once the government fulfils its debt obligations but not to the current AAA level.
In response to this, the White House reacted saying, ?This is not about additional spending, but this is about honouring the obligations the United States government has made?.
Source: Economic times; REUTERS