Creighton Economist Says Gov’t Default Would Damage Global Value of the U.S. Dollar

(Radio Iowa) Creighton University economist Erie Goss says he expects D-C negotiators will strike a deal to raise the federal government’s debt ceiling.

“To paraphrase Winston Churchill, when you try every other thing that doesn’t work, you somehow stumble upon what does work,” Goss says, “and I think there will be a solution.” But Goss says investors should expect volatility as the stalemate between Republicans in Congress and President Biden remains unresolved.

“There will be some real deviations, some real swings here in the next week or so as they try to find that solution,” Goss says. “That would be swings in the stock market, swings in the bond market and also in terms of gold prices, for example.” If the impasse isn’t resolved before the U.S. government runs out of cash to pay its bills, Goss says things like Social Security checks could be delayed. The main impact of default, according to Goss, would be damage to the U.S. dollar, since central banks in other countries hold U.S. currency in reserve.

“The dollar will remain the reserve currency, but it will undermine it,” Goss says. Goss says it would aid China’s push to make the Yuan (yoo-AHN) the reserve currency of the globe. Having the U.S. dollar be the dominant currency around the world aids U.S. trade and creates stability for the goods and services Americans buy.
(Mike Petersen, KMA, Shenandoah)