US Treasury Secretary warns: recession due to default

Released on 05.10. 2021

  • US Treasury Secretary Janet Yellen fears “catastrophic” consequences in the event of a default. Photo: Al Drago

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Unless Congress raises or suspends the debt ceiling, the US government is at risk of default. A solution is not yet in sight. The finance minister warns of “catastrophic” consequences.

Washington (dpa) – In the opinion of Treasury Secretary Janet Yellen, a US government default would lead to a “recession”.

If Congress does not raise the debt ceiling in time or should suspend, threatened “catastrophic” consequences, warned Yellen on the CNBC TV channel. “I absolutely expect that this would also cause a recession,” said the minister. The behavior in Congress endangers the recovery of the US economy from the Corona crisis and is «irresponsible», said Yellen.

The Treasury Department has warned that the US could start from the . October run out of money. A default would damage confidence in the creditworthiness of the world’s largest economy, which could trigger a financial crisis and economic turmoil to blame. The Democratic President Joe Biden only accused the Republicans on Monday of blocking the increase for political reasons and thus playing “Russian roulette” with the US economy. A default on payment would jeopardize the US dollar’s reserve currency status and lead to higher interest rates for consumers in the US, he warned.

The most recent debt limit expired in July. Since then, the Ministry of Finance has been taking “extraordinary measures” to prevent a payment default. So far, Republicans and Democrats have still agreed to raise the limit – albeit often after trembling and several rounds of negotiations.

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