USA: shadow of “default” hangs over debt, Yellen worries

Janet Yellen, US Secretary of the Treasury (Minister of Finance), is more than worried: the country risks going “default”, that is to say of not paying its creditors and not being able to borrow. A short-term risk: it could fall as soon as this summer. And the economic consequences for the country would be “catastrophic”.

Yellen warns: US won’t be able to pay

Wednesday June 23, 2021, before Congress, Janet Yellen made a request which, if not unprecedented in the history of the United States, is symbolic of the economic crisis that is hitting the world after the Covid health crisis -19: raise the debt ceiling. Without this, explains the Secretary of the Treasury, a bankruptcy (default) ” absolutely catastrophic Could occur.

I think defaulting on the national debt should be seen as unthinkable Said Janet Yellen reported by Business Insider. She reminded Congress that it would be an unprecedented fact in the history of the United States that the latter do not pay their due.

Default on July 31, 2021… and an economic crisis from the summer?

According to the Secretary of the Treasury, the government could find itself unable to pay its debts maturing on July 31, 2021. However, according to American law, it is simple: the debt ceiling implies that the country cannot borrow until it has paid off previous creditors. The federal system, unable to pay its bills, would therefore be in crisis.

Temporality is also playing against Janet Yellen: if the government is able to maintain a certain cash flow, in particular for its own administrative services, beyond the moment when it reaches the debt ceiling and can no longer to borrow, it is far from eternal. These extraordinary measures could be exhausted in their turn during the month of August 2021 … while Congress is on vacation and therefore cannot make decisions.

However, the situation would be catastrophic: “ I think it would lead to a financial crisis “And that it would threaten” Americans’ jobs and savingss, ”said Janet Yellen. A crisis that would be added to the global crisis.