The United States is going to "default one way or the other" and talks between Republican and Democratic leaders to lift the debt ceiling are "a sham" that won't do anything to prevent it, says international investor Jim Rogers.
Lawmakers will probably find a way to lift the $14.3 trillion debt ceiling, which the government says has to happen by Aug. 2, but gaping deficits have and will inflict enough damage to the dollar that a default is unavoidable.
Plus the debate will resume shortly after Aug. 2 anyway, as the government will quickly spend beyond its means again.
"It might be good for the world if the United States closed down for a while, but I can’t see that happening," Rogers tells Fox Business.
(Getty Images photo)
"Something will happen, things will look better, but then in six months or a year, things will be worse again."
Ratings agencies have said the U.S. could lose its coveted AAA ratings if it defaults on its debt, while Treasury Secretary Tim Geithner has said failure to agree lifting the borrowing limit could be devastating to the economy because the U.S. won't be able to pay its bills.
The International Monetary Fund, meanwhile, has said it's not just the U.S. that will suffer.
"The federal debt ceiling should be raised expeditiously to avoid a severe shock to the economy and world financial markets," the IMF says in a report, Bloomberg reports.
Failure to reach a budget and debt compromise could result in a "sudden increase in interest rates and/or a sovereign downgrade."
Meanwhile, President Barack Obama and congressional leaders, struggling to break an impasse over taxes and spending cuts, will regroup Tuesday to seek common ground for a deal to avoid a looming U.S. debt default.
"Failure is not an option," Obama's Treasury secretary, Timothy Geithner, said before the talks got under way.
Obama and top lawmakers from both political parties will hold their third meeting in as many days at the White House at 3:45 p.m. to hammer out a deal to reduce the U.S. deficit and raise the debt ceiling by Aug. 2, when the U.S. Treasury says it will run out of money to pay the country's bills.
A former top economic adviser to Obama, Larry Summers, warned of "financial Armageddon" if the debt limit, which caps how much the United States can borrow, was not raised. But, he said he was confident both sides would reach agreement in time to avert such a scenario.
But the White House and Republican leaders remain far apart on the role of revenues in a deficit-fighting plan.
Obama is pressing for a big, $4 trillion package that would encompass spending cuts, tax increases for top earners, and reform of expensive entitlement programs for the elderly and the poor.
Republicans are pressing for a smaller, $2 trillion deal that is limited to spending cuts.
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