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

EconomySep 19, 2021 06:45PM ET
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© 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.

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.

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

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Comments (37)
John Thompson
John Thompson Sep 20, 2021 12:17PM ET
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lol lets hope so so the rest of the world can live normally without the dollar
Emmanuel Jabin
Emmanuel Jabin Sep 20, 2021 10:33AM ET
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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.
Dhananjay Joshi
Dhananjay Joshi Sep 20, 2021 2:40AM ET
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how these guys are going pay back this debt ? is any one thinking about that?
Dave Collins
Dave Collins Sep 20, 2021 1:07AM ET
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Come on Dems- you have the majority - pass the debt ceiling without your pipe dream spending bill - getrdone
Dave Jones
Dave Jones Sep 20, 2021 12:40AM ET
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Dear America. Is old joe ok? He seems like a really old bumbling incompetent buffoon. I really hope he's ok.
cj go
cj go Sep 20, 2021 12:40AM ET
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is that a serious question- he's gone af- we can see from uk
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Sep 19, 2021 11:37PM ET
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you don't want to borrow more cheaply or less, just don't borrow so much for it loses itself and the friend
David David
David9 Sep 19, 2021 10:56PM ET
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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...
Edoardo Schieppati
Edoardo Schieppati Sep 19, 2021 10:56PM ET
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Acttually that a Matthew verse
bret lafrance
bret lafrance Sep 19, 2021 9:54PM ET
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the repubican party is going to cut off all our noses
Eudon Hickey
Eudon Hickey Sep 19, 2021 9:54PM ET
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The democrats do that themselves already, they drain the blood of the USA.
ishak ahmad
ishak ahmad Sep 19, 2021 9:33PM ET
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Just eat potatoes for lunch n dinner for whole year ! no more 🐠🦐🐙🦀 ,,,, 👍
David David
David9 Sep 19, 2021 9:32PM ET
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every americans need to learn how to cry... cause when the collapse come, the only way to to cry to relieve the anxiety...
Erski Gumby
SB20 Sep 19, 2021 9:32PM ET
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Keep trying wong.
James White
James White Sep 19, 2021 9:21PM ET
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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.
Benjamin McIntire
Benjamin McIntire Sep 19, 2021 9:21PM ET
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The coup? Jan 6 domestic terrorism event was a failure.
Benjamin McIntire
Benjamin McIntire Sep 19, 2021 9:21PM ET
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James Edwards wow im sure that makes sense in your head.. well probably not there either actually
cj go
cj go Sep 19, 2021 9:21PM ET
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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
cj go
cj go Sep 19, 2021 9:21PM ET
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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
Chris Kellerman
Chris Kellerman Sep 19, 2021 9:10PM ET
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Hey here’s an idea stop spending so much of our money.
Chris Sundo
Chris Sundo Sep 19, 2021 9:02PM ET
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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
Chris Kellerman
Chris Kellerman Sep 19, 2021 9:02PM ET
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Futures aren’t looking like that
Chris Sundo
Chris Sundo Sep 19, 2021 9:02PM ET
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You mean futures are looking up?
Dan Dsouza
Dan Dsouza Sep 19, 2021 9:01PM ET
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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
Benjamin McIntire
Benjamin McIntire Sep 19, 2021 9:01PM ET
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Its their demented prepper fantasy they keep warning us about. As if the end is going to be caused by financial issues.
cj go
cj go Sep 19, 2021 9:01PM ET
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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'
Richard Ellis
Richard Ellis Sep 19, 2021 9:00PM ET
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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.
cj go
cj go Sep 19, 2021 9:00PM ET
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what's the logic to that?
William Bailey
William Bailey Sep 19, 2021 8:59PM ET
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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
Jokers R Us
Jokers R Us Sep 19, 2021 8:58PM ET
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Debt default is the only thing that would fix us.
Green Mango
Green Mango Sep 19, 2021 8:56PM ET
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Did she just say "Mowgage payments, caw woans, cwedit cawd biws—evewything that is purchased wif cwedit would be coswlier after defawt." ?
Sol Wein
Sol Wein Sep 19, 2021 8:55PM ET
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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
vipul garg
vipul garg Sep 19, 2021 8:47PM ET
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She will drown American economy to a very deep height
Tom Woosley
Tom Woosley Sep 19, 2021 8:43PM ET
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Why don't they think of all that before they pass ridiculous spending bills?
Steffen vdm
Steffen vdm Sep 19, 2021 8:43PM ET
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That requires intelligence and long term vision. Politicians are famous for not having any
Bill Bill
Bill Bill Sep 19, 2021 8:29PM ET
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This is funny. Nothing but empty fear. No default risk in october. Funny stuff!
Green Mango
Green Mango Sep 19, 2021 8:29PM ET
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Yea, they even shut down libraries and other fed items to pump the fear.
William Smith
William Smith Sep 19, 2021 8:26PM ET
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Blah Blah Blah. She printed TRILLIONS when head of the Fed and then regurgitates this trash.
Hero RC
Hero RC Sep 19, 2021 8:01PM ET
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Just inflate more america debt is nothing
HD HD
HD HD Sep 19, 2021 7:22PM ET
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it will give me a sweet dip to buy.
David David
David9 Sep 19, 2021 7:22PM ET
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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...
 
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