"If the US fails to pay its debts, there will be a systemic financial crisis, particularly because the US dollar is a so-called key currency in the global economy," said Sergio Rossi. "A former US Treasury Secretary told Europe that ‘the US dollar is our currency, but your problem’, since the 1944 Bretton Woods agreements put this currency at the core of the international monetary regime. Hence, any US default will destabilize the global economy with a series of domino effects, in particular across financial markets that would induce a dramatic global crisis, with a series of negative consequences for several banks and non-bank financial institutions, small and medium-sized firms as well as transnational corporations across the world."
"The sustainability of US public debt depends on two issues," said Rossi. "On the one hand, this has to do with the object of increasing public debt: if this occurs for investment purposes – particularly as regards healthcare, public transports, education and a properly-defined ecological transition, it will increase produced output as well as social cohesion and the employment level, which will allow the US federal government to reimburse this debt eventually. On the other hand, much depends on the US monetary policy stance, to wit, on the evolution of the policy rates of interest decided by the Federal Reserve, which in both the short and long run affect all market rates of interest, hence also the interest rate the US government must pay to its bondholders. If this rate increases over time, as one can note in this period, then a larger share of public expenditures is dedicated to such a debt service, thereby reducing the amount of tax income the government can really use to finance its provision of public goods and services such as healthcare and education (…) If the Federal Open Market Committee (FOMC) decides to raise interest rates again in the US, it will further aggravate the situation, first across the financial sector, then also in the economy as a whole – both in the US and across the global economy."