US Treasury Secretary Warns of Risk of “Historic Financial Crisis”

U.S. Treasury Secretary Janet Yellen strongly advocated Sunday for Congress to raise the debt ceiling at the risk of causing “A historic financial crisis”. In a column published in the Wall Street Journal, Janet Yellen warns: “The default could trigger a spike in interest rates, a sharp drop in stock prices and other financial turmoil”writes Joe Biden’s finance minister.

The debt ceiling, which only Congress has the prerogative to raise, came into effect on 1^er August. It prohibits the United States from issuing new loans to finance itself if the current limit of 28.4 trillion dollars is not raised.

This recovery is regularly the subject of political arm wrestling in Congress. Since the 1960s, the debt ceiling has been raised or suspended some 80 times.

The specter of “millions of cash-strapped Americans”

Last week, the Treasury Department indicated that the United States would be strapped for cash “During the month of October”.

Janet Yellen describes in her column a cascade of financial catastrophes if the borrowing capacity of the United States, in order to be able to meet its deadlines, was not raised. “In a few days, millions of Americans would be short of cash (…). Nearly 50 million elderly people would no longer receive their retirement checks and the soldiers would no longer be paid ”, she writes. “We would get out of this crisis a permanently weakened nation”, said the Secretary of the Treasury.

Even though the United States has never failed – “Not once”, underlines Ms. Yellen -, she recalls the episode of 2011 “Who brought America to the brink of crisis”. Under the Obama administration, the political deadlock in Congress led the Standard and Poor’s rating agency to withdraw the rating “AAA” to US debt, causing a shock wave in the markets.

“Delay more” to increase the debt capacity of the United States “Is not tolerable”, adds Ms. Yellen. “The past 17 months have tested the economic strength of our country. We are just emerging from the crisis. We must not go back to a situation, which is completely avoidable ”, she concludes.