Treasury Secretary Timothy Geithner has warned that a default on US debt may spark “worldwide panic.”
Janet Yellen says that Washington must raise the cap on how much it can borrow by June 1.
Treasury Secretary Janet Yellen warned on Tuesday that if the US doesn’t find a way to pay its debts, it could have big effects on the US economy and the world economy as a whole. She told the trade group Independent Community Bankers of America that “time is running out” for Congress to raise the country’s borrowing cap of $31.4 trillion.
US President Joe Biden and the Republican-controlled House of Representatives have been unable to agree on this problem for months, even though the Treasury has repeatedly warned that if the ceiling isn’t raised, the US could default for the first time on June 1.
“Every day that Congress doesn’t do anything, we have to pay more money, which could slow down the US economy… Congress needs to do something as soon as possible… “A US default would cause a financial and economic disaster,” Yellen said, adding that her department is close to running out of the emergency accounting methods it has been using to keep the default from happening over the past few months.
The senior official said that if the country went into default, it would stop the country’s economic growth and cause an “unprecedented economic and financial storm.” It would cause people to lose money, start a slowdown in the US, and hurt the world economy.
“The US Treasury market is the foundation of the world’s banking system… The rest of the world has never doubted that America will pay all of its debts and interest on time and in full. “A default would shake the very foundations of our financial system,” Yellen said. She also said that this would cause “panic around the world,” which would lead to “margin calls, runs, and fire sales.”
Later on Tuesday, President Biden will meet with Kevin McCarthy, the Republican speaker of the House of Representatives, and three other top congressional leaders to talk about a possible deal to raise the debt ceiling.