“U.S. inflation is not going to be affected by a default in Russia. What is going to affect inflation in the U.S. are the sanctions with the overlay of supply chain issues.”
ABC News business and economics correspondent Deirdre Bolton explains the global impact of Russia defaulting on its debt.While Russia’s attack on Ukraine has many serious humanitarian consequences, there are also financial ones.
Distressed debt investors such as Hans Humes, CEO of Greylock Capital, emphasize that the amount is small and that an initial default is already widely expected. If Russia were to default on some or all of its debt, there would probably be greater global market volatility on the news, but longer term, the greatest risks to the global economy and the U.S. economy are"the unintended consequences of sanctions placed against Russia and the resulting supply chain issues," he said.
In war times, there are myriad extra wrinkles. Due to the sanctions the West has placed against Russia, the country is isolated from most of the global banking system. The U.S. Treasury has offered Russia a loophole to pay its dollar-denominated debt until the end of May; it is unclear what happens after that.
The American banks that have Russian debt in their portfolios have very small amounts. The bonds are in specialty emerging markets funds and they are a small part of those funds. Additionally, American banks are reducing even these small amounts of exposure to comply with sanctions and avoid unnecessary risk.
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