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“Bankers Fear Debt Catastrophe”
by Sydny Morning Herald   
October 14th, 2013
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Global finance leaders have warned a US debt default would be “utterly catastrophic”, as some analysts flagged a new era of US political dysfunction that could expose the world’s largest economy to increased instability.

Just days before the Thursday deadline to lift the US government’s $US16.7 trillion debt ceiling, some of the world’s top bankers said a default on debt obligations would be too terrible to contemplate and would have dire consequences on the global economy.

“World leaders are saying, ‘Get on with it and get this resolved. It’s not just about you’,” JBWere executive director Mike Kendall said.

“This isn’t the time to be tap dancing to the mid-term elections in the US. This affects everyone.”

Federal Treasurer Joe Hockey said on the sidelines of World Bank and International Monetary Fund meetings in Washington at the weekend that he was confident of a political resolution, although markets were “in for a continuing volatile period”.

Financial markets rallied across the board on Friday as US politicians signalled a willingness to push back the debt ceiling deadline as a debate over the budget continued. But talks between the White House and House Republicans broke down as the US entered a long weekend, raising the prospects of another week of market volatility.

“There isn’t life beyond default,” Deutsche Bank chief executive Anshu Jain cautioned during a finance conference in Washington DC.

”This would be a very rapidly spreading, fatal disease … you’re now talking about the underpinnings of finance,” Mr Jain said, describing a default as ”utterly catastrophic”.

JPMorgan chief executive Jamie Dimon said banks had already spent ”huge amounts” of money preparing for a default that could damage the post-financial crisis economic recovery.

”It would ripple through the global economy in a way you couldn’t possibly understand,” Mr Dimon said. ”We need global growth … We are on the verge of getting it. Please let’s not shoot ourselves in the foot.”

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