US Minister of Finance Warns of American Debt Default Risk


Minister of Finance United States of America (US) Janet Yellen warned congress’ failure to raise the government’s debt ceiling could run the risk of default and trigger “economic catastrophe”.

This condition will lead to higher interest rates in the future.

Yellen, in prepared remarks for a Washington event with business executives from California, said US default on debt repayments would result in job losses, as well as encourage more waiting household payments on mortgages, car loans and credit cards.

“A default on our (US) debt will result in an economic and financial disaster,” Yellen said, quoted from ReutersTuesday (25/4).

“Failure will raise borrowing costs forever. Future investments will be much more expensive,” he continued.

Yellen added it was Congress’s “basic responsibility” to increase or suspend the $31.4 trillion lending limit. To quote Armfalcon.comThe US Ministry of Finance noted that as of March 31, US debt exceeded US$31.45 trillion.

This means that the debt limit has been reached and the US Treasury can no longer issue bonds to finance spending.

As a result, the US government has to reduce spending and choose whether to meet it, paying civil servant salaries, Social Security benefits, or interest on debt. If the US government chooses not to pay interest on the debt, it is called default.

Yellen said that unless the debt ceiling was raised, US businesses would face deteriorating credit markets, and the government would likely be unable to issue payments to military families and the elderly who depended on Social Security.

“Congress must vote to increase or suspend the debt limit. It must be done unconditionally. And it should not wait until the last minute,” Yellen said.

Yellen told lawmakers in January that the government could only pay its bills until early June without raising the limit, which the government reached in January.

[Gambas:Video CNN]



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