London Daily

Focus on the big picture.
Friday, Aug 22, 2025

Goldman Sachs warns of a 'real risk' that America could default on its debt

Goldman Sachs warns of a 'real risk' that America could default on its debt

Concern is rising on Wall Street over Washington's debt ceiling game of chicken. Goldman Sachs warned clients on Wednesday that Congress may fail to raise or suspend the debt ceiling prior to the October 18 deadline.
"It looks unlikely that Congress will address the debt limit before the last minute, and there appears to be a material risk that Congress fails to act by the October 18 deadline," Goldman Sachs economists wrote in in a note.

The Wall Street bank added that a "lapse in borrowing authority looks like a real risk," although that lapse would "probably be brief."

It's important to note that the Goldman Sachs warning was published prior to news that Senate Minority Leader Mitch McConnell is weighing two ideas to offer Democrats on addressing the debt limit. One option would be a short-term raise of the debt ceiling, a Republican source told CNN's Manu Raju.

Treasury Secretary Janet Yellen on Wednesday reiterated that if the debt ceiling is not raised, the federal government will run out of cash and face extraordinary measures by October 18. After that date, Treasury would have very little cash to pay the nation's bills.

"While not our base case, we also believe there is a real risk that Congress will miss the deadline," Goldman Sachs economists wrote in the report.

Goldman Sachs is not putting much stock in any unilateral actions the Treasury Department could take to address the debt limit, including minting a $1 trillion coin or disregarding the limit by citing the 14th Amendment.

"It is impossible to rule these or other steps out entirely, but we are skeptical that such moves will come into play this year," the economists said in the report.

The most likely option to address the debt crisis, according to Goldman Sachs, is a standalone debt limit increase through reconciliation — a process that Democratic leaders have argued against.

One big disadvantage here is that it would likely force Democrats to specify a new dollar amount for the debt limit, probably near $31 trillion, instead of just suspending it, Goldman Sachs said.

"Of course, these disadvantages are the reasons Republicans would like to require Democrats to use it. Nevertheless, this seems like the most likely option at the moment," the economists said.

Goldman Sachs stressed that any lapse in borrowing authority would likely be brief because "the public and financial market response would likely force a quick political resolution."

If Congress misses the deadline, Goldman Sachs said Treasury would likely continue to pay principal and interest on Treasuries but stop other payments that everyday Americans rely on.
Newsletter

Related Articles

0:00
0:00
Close
Bunkers, Billions and Apocalypse: The Secret Compounds of Zuckerberg and the Tech Giants
Ukraine Declares De Facto War on Hungary and Slovakia with Terror Drone Strikes on Their Gas Lifeline
Animated K-pop Musical ‘KPop Demon Hunters’ Becomes Netflix’s Most-Watched Original Animated Film
New York Appeals Court Voids Nearly $500 Million Civil Fraud Penalty Against Trump While Upholding Fraud Liability
Elon Musk tweeted, “Europe is dying”
Far-Right Activist Convicted of Incitement Changes Gender and Demands: "Send Me to a Women’s Prison" | The Storm in Germany
Hungary Criticizes Ukraine: "Violating Our Sovereignty"
Will this be the first country to return to negative interest rates?
Child-free hotels spark controversy
North Korea is where this 95-year-old wants to die. South Korea won’t let him go. Is this our ally or a human rights enemy?
Hong Kong Launches Regulatory Regime and Trials for HKD-Backed Stablecoins
China rehearses September 3 Victory Day parade as imagery points to ‘loyal wingman’ FH-97 family presence
Trump Called Viktor Orbán: "Why Are You Using the Veto"
Horror in the Skies: Plane Engine Exploded, Passengers Sent Farewell Messages
MSNBC Rebrands as MS NOW Amid Comcast’s Cable Spin-Off
AI in Policing: Draft One Helps Speed Up Reports but Raises Legal and Ethical Concerns
Shame in Norway: Crown Princess’s Son Accused of Four Rapes
Apple Begins Simultaneous iPhone 17 Production in India and China
A Robot to Give Birth: The Chinese Announcement That Shakes the World
Finnish MP Dies by Suicide in Parliament Building
Outrage in the Tennis World After Jannik Sinner’s Withdrawal Storm
William and Kate Are Moving House – and the New Neighbors Were Evicted
Class Action Lawsuit Against Volkswagen: Steering Wheel Switches Cause Accidents
Taylor Swift on the Way to the Super Bowl? All the Clues Stirring Up Fans
Dogfights in the Skies: Airbus on Track to Overtake Boeing and Claim Aviation Supremacy
Tim Cook Promises an AI Revolution at Apple: "One of the Most Significant Technologies of Our Generation"
Apple Expands Social Media Presence in China With RedNote Account Ahead of iPhone 17 Launch
Are AI Data Centres the Infrastructure of the Future or the Next Crisis?
Cambridge Dictionary Adds 'Skibidi,' 'Delulu,' and 'Tradwife' Amid Surge of Online Slang
Bill Barr Testifies No Evidence Implicated Trump in Epstein Case; DOJ Set to Release Records
Zelenskyy Returns to White House Flanked by European Allies as Trump Pressures Land-Swap Deal with Putin
The CEO Who Replaced 80% of Employees for the AI Revolution: "I Would Do It Again"
Emails Worth Billions: How Airlines Generate Huge Profits
Character.ai Bets on Future of AI Companionship
China Ramps Up Tax Crackdown on Overseas Investments
Japanese Office Furniture Maker Expands into Bomb Shelter Market
Intel Shares Surge on Possible U.S. Government Investment
Hurricane Erin Threatens U.S. East Coast with Dangerous Surf
EU Blocks Trade Statement Over Digital Rule Dispute
EU Sends Record Aid as Spain Battles Wildfires
JPMorgan Plans New Canary Wharf Tower
Zelenskyy and his allies say they will press Trump on security guarantees
Beijing is moving into gold and other assets, diversifying away from the dollar
Escalating Clashes in Serbia as Anti-Government Protests Spread Nationwide
The Drought in Britain and the Strange Request from the Government to Delete Old Emails
Category 5 Hurricane in the Caribbean: 'Catastrophic Storm' with Winds of 255 km/h
"No, Thanks": The Mathematical Genius Who Turned Down 1.5 Billion Dollars from Zuckerberg
The surprising hero, the ugly incident, and the criticism despite victory: "Liverpool’s defense exposed in full"
Digital Humans Move Beyond Sci-Fi: From Virtual DJs to AI Customer Agents
YouTube will start using AI to guess your age. If it’s wrong, you’ll have to prove it
×