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U.S. Treasury's Yellen: Debt default would 'permanently' weaken America

Published 09/19/2021, 04:58 PM
Updated 09/19/2021, 06:45 PM
© Reuters. FILE PHOTO: U.S. Treasury Secretary Janet Yellen testifies before the Senate Appropriations Subcommittee on Financial Services about the FY22 Treasury budget request on Capitol Hill, in Washington, DC, U.S., June 23, 2021. Shawn Thew/Pool via REUTERS

© Reuters. FILE PHOTO: U.S. Treasury Secretary Janet Yellen testifies before the Senate Appropriations Subcommittee on Financial Services about the FY22 Treasury budget request on Capitol Hill, in Washington, DC, U.S., June 23, 2021. Shawn Thew/Pool via REUTERS

By David Lawder

WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen issued a fresh plea for Congress to raise the federal debt ceiling on Sunday, arguing a default on U.S. debt would trigger a historic financial crisis.

In a Wall Street Journal opinion piece https://www.wsj.com/articles/congress-raise-debt-limit-ceiling-yellen-treasury-brinkmanship-federal-budget-11632069056, Yellen said that the crisis triggered by a default would compound the damage from the continuing coronavirus pandemic, roiling markets and plunging the U.S. economy back into recession at the cost of millions of jobs and a lasting hike in interest rates.

"We would emerge from this crisis a permanently weaker nation," Yellen said, noting that U.S. creditworthiness has been a strategic advantage.

Yellen did not offer a new timeline for a possible default, but described economic damage that would fall on consumers through higher borrowing costs and lower asset prices.

She has said previously that a default could come during October when the Treasury exhausts its cash reserves and extraordinary borrowing capacity under the $28.4 trillion debt limit.

"We can borrow more cheaply than almost any other country, and defaulting would jeopardize this enviable fiscal position. It would also make America a more expensive place to live, as the higher cost of borrowing would fall on consumers," Yellen wrote. "Mortgage payments, car loans, credit card bills—everything that is purchased with credit would be costlier after default."

Republicans have refused to support raising or suspending the $28.4 billion. U.S. Senator Bill Cassidy from Louisiana said earlier on NBC's "Meet the Press" program that Democrats want to increase the borrowing cap to fund trillions of dollars in "Democratic wish list" spending.

Yellen argued the debt ceiling is about paying for past spending obligations, and said waiting too long to lift the debt ceiling can still cause damage, citing a 2011 debt ceiling crisis that pushed the federal government to the brink of default that prompted a credit rating downgrade.

"This led to financial-market disruptions that persisted for months. Time is money here, potentially billions of dollars. Neither delay nor default is tolerable."

House of Representatives Speaker Nancy Pelosi, in a statement, cited Yellen's past remarks on the issue and noted that Congress addressed the debt ceiling on a bipartisan basis three times during the Trump administration.

"When we take up the debt limit this month, we expect it to be bipartisan once more," Pelosi said.

© Reuters. FILE PHOTO: U.S. Treasury Secretary Janet Yellen testifies before the Senate Appropriations Subcommittee on Financial Services about the FY22 Treasury budget request on Capitol Hill, in Washington, DC, U.S., June 23, 2021. Shawn Thew/Pool via REUTERS

Still, House Majority Whip Jim Clyburn on Sunday that Democrats may have to pass the debt ceiling hike without Republican support.

"I think we ought to do what’s necessary and message to the American people exactly who is trying to destroy this great democracy that we hope to keep in place," he told CNN.

Latest comments

Most of the World knows the US Dollar is dying slowly due to devaluation. America is already weak. what she is talking about is "permanently weakness". US Debt is no longer attractive. Even China has been reducing its buying of US Bonds. According to US Treasury Department Data, in August, China's holdings of US Treasuries dropped to $1.062 trillion in June, down by $16.5 billion from the previous month.  In the first half of the year, China sold US Treasuries between March and June, with total of about $10.4 billion.
how these guys are going pay back this debt ? is any one thinking about that?
Come on Dems- you have the majority - pass the debt ceiling without your pipe dream spending bill - getrdone
Dear America. Is old joe ok? He seems like a really old bumbling incompetent buffoon. I really hope he's ok.
is that a serious question- he's gone af- we can see from uk
you don't want to borrow more cheaply or less, just don't borrow so much for it loses itself and the friend
During the financial crisis, China came with trillions to help is out 9f the slump, but I am afraid that ain't happening this time... that is why Confucius said... don't do on to others what you don't want others to do unto you...
Acttually that a Matthew verse
Just eat potatoes for lunch n dinner for whole year ! 😅no more 🐠🦐🐙🦀 ,,,, 👍
every americans need to learn how to cry... cause when the collapse come, the only way to to cry to relieve the anxiety...
Keep trying wong.
The US is permanently weak after the coup, the dollar will collapse by end of 2021, and inflation will run wild. Crab went from $23 to $30 a pound to $125 to $152 a pound and now resturants have stopped serving it.
wow im sure that makes sense in your head.. well probably not there either actually
color revolution the your entire U.S. government staged- it's what the cia does to other countries to push out regimes america doesn't like- it's what they did to trump- look it up and do the research
exactly why no1 trusts America or alphabet arms- the world just plays along until they can get you guys back- you guys are corrupt af
Hey here’s an idea stop spending so much of our money.
Smells like a pre-recorded msg released now to help talk the market down. -- How about we gap down at the open tomorrow and then make a really long up-candle tomorrow, for a nice gain, then gap-up on TUE A.M. and drop down again to not only complete a Megaphone pattern but to also shorr again from a higher vantage point. After all we,re going sideways here, although it is Sept with a down bias
Futures aren’t looking like that
You mean futures are looking up?
Chumps here talking about how US should default and that the people should learn to live properly are forgetting that if the US goes down, everybody goes down. If the US consumes lesser, China makes lesser, India makes lesser, Europe makes lesser, the Middle East and Russia pump lesser crude. Middle East pumps lesser means either the expats get pay cuts or lose jobs which means lesser remittances to their home countries. Wishing that the country with the largest GDP and being the most spendthrift goes bankrupt, means everyone suffers. And thats the price to pay. Because everyone allowed this so everyone pays
Its their demented prepper fantasy they keep warning us about. As if the end is going to be caused by financial issues.
it's much more than demand for goods- look at your countries BOP from the IMF- specifically look at the portfolio and direct investment portion- if america takes a hit- the countries that import to you use dollars for those investments and financially would be devastated- not to mention the amount of International debt your country has given to others- if the fed raises rates, economists expect defaults worldwide and a crash worse than 08'
The girl wants to keep the printing press going full speed ahead on printing green backs. She knows if the debit ceiling isn't raised inflation will be a rocket to the moon.
what's the logic to that?
The lowered asset prives willPrimarily hit the wealthiest and make it easier for the middle ckass to afford assets … very few Americans benefit from the low interest ( 7 percent). Yellin is only appealing to the top 5 to 7 percent
Why have a debt ceiling if you are going to keep raising it? And why admit to our creditors that we are one debt ceiling away from not paying our debts? Lol
She will drown American economy to a very deep height
Why don't they think of all that before they pass ridiculous spending bills?
That requires intelligence and long term vision. Politicians are famous for not having any
This is funny. Nothing but empty fear. No default risk in october. Funny stuff!
Just inflate more america debt is nothing
it will give me a sweet dip to buy.
this will not be a sweet dip... if the collapse happens, it will be decades of turmoil and stocks will take decades to come back to this level...
I think we would become out stronger. Just write off the debt. It was printed from nothing anyway. Plus get rid of the the FED.
If you are 28.4 Trillion in debt wouldn't it be a good time to payoff that debt before you spend more. If you can't payoff existing debt on Revenues you receive without accumulating additional debt than your credit line needs to be turned off and you restucture your existing debt and let the chips fall where they may before you start forgiving student loans and giving away money to make bums out of us all. I truly hope they default and if you don't own Gold you will wish you did before long. Remember the Bolivar.
Cool. So to pay it off, we raise taxes. Cant have it both ways, fella.
 It's called stop spending, but I guess you're right the society we live in is a gimme, gimme, gimme! F paying for anything!
Every Americans need to learn how to live on a poor budget. No more buying cloths and gadgets, eat once a day, wear a coat in the house and turn down the heat, cut all entertainment and subscriptions, reuse paper towels and learn to wash ***instead of use toilet paper, etc.... the dark days will come when this economic collapse happens...
but meanwhile let's get millions of people still coming across the border set up on more social service programs. Makes perfect sense😑
Common sense WO. Anyone who down votes your comment has none. Can't fix stupid.
The US is broke. Quit spending and quit kicking the can down the road.
Raising the debt ceiling is just a technical term for selling US debt to China. China already owns the US anyway
LoL...China...that country that we will.have another fake war with that results in the death of thousands of American lives.Gen Milley feels comfortable calling on his counterpart to warn about a sitting US president. seem strange?
China indeed owns the US. The empire fell
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