Treasury Secretary Janet Yellen on Thursday agreed that any default on US debt would cause irreparable damage, as well as a financial crisis and recession.
A member of the House Financial Services Committee asked Yellen if the damage caused by the federal government’s failure to meet its debt obligations would be “irreparable”, to which he replied: “Yes.”
His comments were among the latest in a series of dreadful warnings issued by Yellen as Congress is adamant about withdrawing or suspending the debt limit amid a dispute between the Democratic majority and the Biden administration’s legal program.
Yellen said if Congress does not raise the federal debt limit, the government’s cash will run out by October 18, which is currently limited to .4 28.4 trillion. After that date, the Treasury will be “only in an impossible situation,” Yellen said during his appearance before the committee on Thursday. “We can’t pay all the government bills.”
The debt limit came into effect in August after a two-year moratorium, and the Treasury Department has since appointed “extraordinary measures” to finance the government. Yellen told lawmakers earlier this week that the measures would expire in mid-October, ahead of most analysts’ expectations, after which the government would have insufficient funds to meet all obligations, from social responsibility to principal and interest. Treasury bills, notes and bonds.
Failure to meet these obligations would mark the first time the U.S. default, which Yellen repeatedly called “a disaster.”
“We’re probably going to face a financial crisis, of course a recession,” Yellen told the House committee on Thursday. This is the “long-term consequence of high interest rates for everyone who accepts”.
This is because the U.S. credit rating must be downgraded, and international lenders who have long owned Treasury-owned assets backed by the U.S. government’s “full trust and credit” will no longer view those securities as “risk-free.” “It will make it more expensive for the federal government and everyone else to get expensive.”
Federal Reserve Chairman Jerome Powell said the US central bank has limited control over such incidents.
“No one assumes we can really do a lot,” Powell told lawmakers Thursday. “No one will take over the Federal Reserve or anyone else to protect the American people from its consequences.”
This News Originally From – The Epoch Times