Janet Yellen Says US Debt Default Could Cause “Global Financial Crisis”

A US debt default will occur “Certainly leading to a recession in the US and a global financial crisis”The US Treasury Secretary, Janet Yellen, warned on Friday, January 20, in a question on CNN.

The United States on Friday reached its debt ceiling set by Congress at more than $31 trillion. So far elected officials have been unable to agree on raising or suspending the cap.

This case is not exceptional, as this ceiling has been the subject of legislative intervention seventy-nine times since 1960.

The threat of recession

But the Republican majority in the House of Representatives wants to use the matter to pressure Democrats to cut a certain number of expenses, especially as a result of programs implemented since the beginning of the president’s order. Joe Biden, as well as taxes.

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

“But more than that, failure to pay our debt obligations, recipients of social spending, or our military could cause a recession in the United States and a global financial crisis.”Ms. Yellen promised.

“This will undoubtedly undermine the dollar’s role as a reserve currency used in transactions around the world. A lot of Americans will lose their jobs.”She insisted.

Once the ceiling is reached, the US Treasury cannot borrow even in the short term for working capital needs. It has implemented a lending moratorium that will last until June 5.

Exception actions

of “Exceptional Measures” The Minister said that the suspension of payments to several pension funds and health or disability benefits for public officials, including technical adjustments not immediately required for the payment of pensions, have been taken.

These measures allow the US administration to look ahead, but it can only be temporary and if Congress fails to reach an agreement, the US will eventually find itself in a default situation.

Ms Yellen was welcomed on Friday by the current head of the African Union and President Macky Sall of Senegal, with whom she discussed relations with Africa.

“We are here as a partner, helping Africa work towards success.”She said after the meeting.

The trip is the first in a long-awaited series of visits by top officials from the Biden administration. The US wants to regain influence on the African continent, where there is fierce economic and political competition between the superpowers. Ms. Yellen also indicated that President Biden will visit sub-Saharan Africa before the end of the year.