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

Economy Sep 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 (32)
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
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 USA
Benjamin USA Sep 19, 2021 9:21PM ET
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The coup? Jan 6 domestic terrorism event was a failure.
Benjamin USA
Benjamin USA 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.
 
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