U.S. Failure To Lift Debt Ceiling Could Damage World Says IMF

Failure to raise the U.S. debt ceiling could damage not only the United States but the rest of the global economy, International Monetary Fund chief Christine Lagarde said on Thursday (October 3).

"It is 'mission-critical' that this be resolved as soon as possible," she said in a speech in Washington, ahead of the IMF and World Bank annual meetings next week.

She said growth in the United States has already been hurt by too much fiscal consolidation, and will be below 2 percent this year before rising by about 1 percentage point in 2014.

The U.S. Congress imposed a so-called sequester, or across the board government spending cuts, earlier this year after failing to agree on a broad budget package.

Turning to the rest of the world, Lagarde pointed to signs of progress in the euro zone and Japan, but said transitions to more stable growth may take a while. The turbulence could reduce GDP in major emerging markets by 0.5 to 1 percentage points, she said.

Lagarde said emerging markets have suffered since the U.S. Federal Reserve announced plans to eventually scale back its own monetary stimulus, which prompted capital outflows as investors bet on higher rates in advanced economies.

Speaking to her audience in broader terms, Lagarde said that five years after the world averted a "second Great Depression," economies are undergoing "multiple new transitions" that may take a decade or longer for many countries to adjust to before there is a full recovery.

She said two kinds of economic transitions stand out in particular -- changes in the patterns of economic growth and a move toward a new kind of financial sector.

"The new rules are changing the economics of banking," said Lagarde. "It is likely that some of the largest banking institutions will not do as much by way of financing infrastructure projects, for instance, or project financing or mortgage lending."

Finally, Lagarde called on governments to better work together on reforming the financial sector, calling progress too slow, partly due to divergences among different countries. She pointed in particular to the "danger zone" of shadow banking, or the non-banking sector that is not under formal regulation.

In the United States, shadow banking is twice the size of the banking sector, and in China half the credit given this year has come from shadow banking, she said.

Ron Paul: Not Raising Debt Ceiling Won't Put U.S. In Default

"They are not going to default, all governments like us they default by giving money with less value, they are good at that. But they are not going to not send the checks out, you think of what happened in'09 when the financial system worldwide was collapsing. The Fed was involved with trillions, some estimate up to 15 trillion in secret they bailed out banks, foreign government, foreign central banks. nobody knew. Are they going to allow our treasury bill interest not to be paid? They are capable doing whatever they want, all they have to do is write an executive order or whatever."

Glenn Beck: WWII Monument Closing Is Proof Obama Could 'Shoot... Millions Dead'

10/3/13 - Conservative radio host Glenn Beck on Thursday warned that the closing of the World War II Memorial in Washington, D.C. because of the government shutdown was a sign that President Barack Obama could be preparing for mass killings. The memorial is just one of hundreds of parks around the country that have been closed due to a partial government shutdown that was forced by Republicans after Democrats refused to defund or delay President Barack Obama's health care reform law. But this week, Republicans have repeatedly accused the president of deliberately conspiring to prevent elderly veterans from being able to see the memorial.

And on Thursday, Beck took those accusations to the next level when he speculated that it could be proof of a communist revolution that could end with "millions dead." "Now, they're putting armed guards around it," Beck said. "So now, they don't care. Now, it is them inflicting the pain intentionally."

"I want you to understand that you are now seeing what I told you about three weeks ago, I told you they have gone from nudge to shove. This is another example that they are deep into shove."

"Your next step is shoot," he added. "Every Marxist communist revolution always ends in millions dead. Always. Without fail. Every time. We talk about the Nazis. 'Oh, they killed 6 million Jews.' The Soviet Union killed 60 million. The Chinese, it's estimated between 70 and 90 million. The Russians starved 7 million."

"This is the beginning of teaching the American people a lesson."