Janet Yellen warns of recession if Congress does not extend debt ceiling

U.S. Treasury Secretary Janet Yellen told CNBC’s “Squawk Box” that she expected the U.S. economy to enter a recession. If Congress doesn’t extend the federal debt ceiling to help the United States avoid defaulting for the first time in history.

“I set a deadline of October 18, if Congress doesn’t extend the debt ceiling. The US government will not be able to pay its obligations. and what will follow is disastrous. I think the severity of this disaster could even lead the US economy into recession,” Yellen said.

The interview reinforces Ms Yellen’s previous warning. What the Ministry of Finance now estimates is that The funds in the ministry’s special measures will be exhausted if Congress does not raise the debt ceiling or suspend the debt ceiling by Oct. 18, at which time. It is expected that the Ministry of Finance has very limited resources. and will run out quickly

The debt ceiling is the total amount that the US government is allowed to borrow in order for the government to legally pay its debts. This includes expenses related to social security and health benefits, interest on government bonds. and other spending

Ms Yellen is also concerned that If the U.S. defaults on its debt, some countries will reduce their holdings of U.S. government bonds and lower demand for the dollar. This could allow the Chinese yuan to replace the dollar as a popular currency in the global market.

“US government bonds have long been viewed as the safest assets in the world. This is partly what makes the dollar an important currency in the foreign exchange reserve system. And if another currency replaces the dollar due to the effects of default. The consequences will certainly be catastrophic,” Ms Yellen said.

President Joe Biden of the United States has urged Congress to accelerate or suspend the debt ceiling this week. He also lashed out at Republican members for blocking efforts to raise the debt ceiling as deceptive behavior.