Impact uncertain if US defaults on loans: PM Lee

THE United States is just eight days away from potentially defaulting on its loans for the first time in history, and this is likely to spell trouble for the world's financial markets should such an unprecedented scenario occur.

Asked if Singapore and the rest of the Asia-Pacific region were prepared to withstand such a shock, Prime Minister Lee Hsien Loong said it was not possible to predict the extent of the impact at this point.

"As far as the whole of the world's financial system is concerned, the US is the 'zero-risk' option. If you lend to the US government, you buy US treasury bills or US government securities, that is by definition what is the almost risk-free solution," said Mr Lee yesterday. "If that fundamental element is shaken, that even the US government can default, I don't know what will happen to your spreads or the rest of the complicated system of financial markets," he told the Singapore media at the end of the Asia-Pacific Economic Cooperation (Apec) summit in Bali.