Yellen warns US Home members of ‘financial collapse’ from default
WASHINGTON: US Treasury Secretary Janet Yellen urged members of the US Home of Representatives on Friday to lift the federal debt ceiling with out circumstances, warning {that a} default on US debt would trigger “financial and monetary collapse.”
Yellen, in funds testimony earlier than the Republican-controlled Home Methods and Means Committee, stated that failure to extend the $31.4 trillion borrowing cap would threaten the financial progress that the US has made for the reason that COVID-19 pandemic.
“In my evaluation – and that of economists throughout the board – a default on our debt would set off an financial and monetary disaster,” Yellen stated. “I urge all members of Congress to come back collectively to handle the debt restrict – with out circumstances and with out ready till the final minute.”
Yellen says a US default may trigger international monetary disaster
Requested about the opportunity of prioritizing funds to cowl US debt funds first from out there money assets, as some Republicans have recommended, Yellen stated that was “not an answer to the debt ceiling problem.”
“Prioritization is solely not paying the entire authorities’s payments once they come due. That’s one thing we have now by no means achieved since 1789. And that basically is simply default by one other identify.”
The one choice to keep away from a crushing spike in rates of interest following a default is for the US to decide to pay its payments on time, she stated.
“If we do not do this and assume that there is some shortcut round it that may keep away from financial chaos, we’re kidding ourselves as a result of not paying the federal government’s payments will produce financial and monetary collapse,” she stated.
Some Republicans have demanded spending concessions from US President Joe Biden in trade for elevating the debt ceiling. Yellen has refused to barter over elevating the debt ceiling, arguing that it’s about making good on Congress’ previous spending choices.
