October 24, 2021

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Janet Yellen declares a "catastrophe" and a "recession" if the US fails to tackle the debt ceiling: what's going wrong?

Janet Yellen declares a “catastrophe” and a “recession” if the US fails to tackle the debt ceiling: what’s going wrong?

Never in its history has the United States failed to pay. But that could happen in two weeks, Treasury Secretary Janet Yellen warned. And the consequences are catastrophic.

Janet Yellen has been warning for weeks: “If nothing changes, the United States will be ready by mid-October.” Bankruptcy. Until then, he urges policymakers to raise or lower the debt ceiling.

Currently, the Treasury Department is using “extraordinary measures” to reduce U.S. revenues since it finally reached its debt ceiling at the end of July. These activities allow the department to maintain its cash flow and settle certain accounts without issuing new securities. But they are temporary and according to the estimates of the Ministry of Finance On October 18th Stop working.

Consequences

In an interview with CNBC on Tuesday, Yellen again called on Democrats and Republicans to urgently address the debt ceiling.

“I see October 18 as a deadline. Failure to pay government bills is disastrous, as we do not have the resources to pay government bills,” Yellen said. “I expect it to cause a recession.”

A U.S. bankruptcy would cause significant damage by high interest rates, a loss of confidence in Washington’s ability to fulfill its future obligations in a timely manner, and a potential recession in social security benefits for about 50 million seniors. There is also a risk that the salaries of US officers and members of the armed forces will be cut.

Such an event would also lead some countries to hold less treasury bonds, which would reduce the demand for the dollar. China can use this to turn the green bag into the preferred currency in the world.

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“U.S. Treasuries have long been considered the planet’s safest asset,” Yellen said. “This is one of the reasons for the dollar’s stockpile.

What exactly is going wrong?

On Monday, President Joe Biden urged Republicans in the Senate to vote to raise the debt ceiling this week or to cause an economic catastrophe for the United States and therefore the world.

Republicans say they are tired of seeing Democrats spend too much. This includes a $ 3,500 billion plan to restructure the structure of American society. According to them, the Democrats want the bill – once their infighting is resolved – to pass the so-called “compromise procedure” in which the Republicans are powerless.

“Since mid-July, Republicans have made it clear that Democrats should raise the credit limit alone,” Senate Republican leader Mitch McConnell wrote to Pitton on Monday. President Pelosi and President Schumer are not a switch that money can be spent on borrowing.

“For the past two and a half months, we have been warning that your party wants to rule alone, so it has to manage the credit limit alone,” he added.

If the Republicans are really in their position, the Democrats may finally be forced to put the cap on their satisfaction bill. CNBC On. This is not easy because many people believe that such a law will not be ready in a few weeks.

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