Yellen Sounds Alarm At G7: Default Risk Puts US National Security Interests In Jeopardy

Benzinga · 05/11/2023 08:16

Treasury Secretary Janet Yellen, while speaking at the meeting of Group of Seven finance officials, reportedly said failure to avert a looming default would spark a global downturn, risk undermining U.S. global economic leadership and raise questions about its ability to defend national security interests.

"There is no good reason to generate a crisis of our own making. The U.S. Congress has raised or suspended the debt limit about 80 times since 1960. I urge it to act quickly to do so once again," she said.

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Yellen emphasized that besides the risk of default, brinksmanship with the debt limit can have significant economic consequences. Referring to the events of 2011, she highlighted that even the mere threat of default could result in credit rating downgrades and a decline in consumer confidence.

"We could see a rise in interest rates drive up payments on mortgages, auto loans, and credit cards. We are already seeing spikes in interest rates for debt due around the date that the debt limit may bind," she said.

Catastrophe: The Treasury Secretary also reiterated that a default on obligations would produce an economic and financial catastrophe with millions of Americans possibly losing their jobs.

"Household incomes would be reduced. American businesses would see credit markets deteriorate. And millions of American families that receive government payments would likely be left without the resources that they were promised," she said.

President Joe Biden and House Speaker Kevin McCarthy are scheduled to meet again on Friday regarding the debt ceiling after they failed to reach a consensus on Tuesday. Biden has urged Republicans to move quickly with the debt ceiling or risk pushing the economy into a recession that would take away thousands of jobs.

Meanwhile, former president Donald Trump on Wednesday urged Republican lawmakers to let the United States default on its national debt if Democrats don't reach a consensus on spending cuts.

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