Janet Yellen says a US debt default would cause a “global financial crisis”

May cause US debt default “It is certain that recession in the United States could lead to a global financial crisis”On Friday, January 20, US Treasury Secretary Janet Yellen warned against being questioned by CNN.

On Friday, the United States reached its congressional-set debt ceiling of more than $31 trillion, and elected officials are currently unable to agree on whether to increase or suspend the ceiling.

This event in itself is not exceptional because this ceiling has been the subject of legislative intervention seventy-nine times since 1960.

specter of recession

However, the Republican majority in the House of Representatives wants to take advantage of this issue to put pressure on the Democrats in order to reduce a certain number of expenditures, especially those resulting from the programs established since the beginning of the president’s term. Joe Biden and so are taxes.

In the event of a US default, “Our borrowing costs will go up and every American will see their borrowing costs follow the same trend.”.

“But more than that, failure to pay, whether it be our debt obligations, our social spending recipients, or our military, will certainly cause a recession in the United States and could lead to a global financial crisis.”Ms. Yellen confirmed.

It will undoubtedly undermine the dollar’s role as the reserve currency used in transactions around the world. Many Americans will lose their jobs.she insisted.

With the ceiling reached, the US Treasury can no longer borrow, even for short-term working capital needs. The debt issuance suspension period, which will run until June 5, has been implemented.

exceptional measures

affiliate “extraordinary measures” The Minister also specified, including stopping payment for many pension funds and health or disability benefits for public employees, and technical modifications that are not immediately necessary for the payment of pensions.

These measures allow the US administration to move forward but can only be temporary, and if Congress fails to reach an agreement, the US could eventually find itself in default.

Ms. Yellen was also received on Friday by Senegalese President Macky Sall, who is also the current chair of the African Union, with whom she discussed relations with Africa.

“We are here as a partner and we will help work towards African success”she said after the meeting.

The trip is the first in a long-anticipated series from senior Biden administration officials. The United States wants to restore its influence on the African continent, the land of fierce economic and political competition between the great powers. Ms. Yellen also noted that President Biden will visit sub-Saharan Africa at the end of this year.