Failure to avert a debt default in the US could have far-reaching consequences for the American and global economies, Treasury Secretary Janet Yellen warned on Tuesday. In remarks made to the Independent Community Bankers of America trade group, she noted that “time is running out” for Congress to lift the country’s $31.4 trillion borrowing limit.
US President Joe Biden and the Republican-controlled House of Representatives have been at an impasse over the issue for months, despite the Treasury’s repeated warnings that unless the ceiling is lifted, the US could face its first-ever default on June 1.
“Every single day that Congress does not act, we are experiencing increased economic costs that could slow down the US economy… It is essential that Congress act as soon as possible… A US default would generate an economic and financial catastrophe,” Yellen warned, adding that her department is close to running out of the emergency accounting measures it has been implementing in recent months to stave off the default.
According to the senior official, a default would stall the country’s economic progress and create an “unprecedented economic and financial storm.” It would lead to a loss of income, trigger a recession in the US, and damage the global economy.
“The US Treasury market serves as the very bedrock of the global financial system… The world has never doubted that America will pay the principal and interest on its bonds, in full and on time… A default would crack open the foundations upon which our financial system is built,” Yellen stated. She added that this, in turn, would lead to “worldwide panic, triggering margin calls, runs, and fire sales.”
President Biden is scheduled to meet Republican House of Representatives Speaker Kevin McCarthy and three other top congressional leaders to discuss a possible deal to raise the borrowing limit later on Tuesday.
For more stories on economy & finance visit RT's business section