The US’ extension of the debt limit into December could bring the global financial markets, including China’s, into a temporary safety strip, experts said, although the possibility of a global financial default is not ruled out entirely in the short term.
They also noted that the massive US debt has now become a sword of Damocles over the global financial markets with high chances of default. This weakens the role of the US debt and the dollar as the safe haven for world financial assets.
The comments were made on Wednesday after US Senate Minority Leader, Mitch McConnell, offered Democrats a deal to raise the US debt ceiling into December to avert a national default and economic crisis. The offer came after the two parties engaged in what overseas media called “a game of chicken” in the raise of the debt ceiling.
On Tuesday, US Treasury Secretary Janet Yellen reportedly said that she believes the US economy would “fall into a…