By Le Figaro with AFP
Posted 2 hours ago, updated 12 minutes ago
The US Treasury Secretary was speaking from Dakar, Senegal, where she embarked on a ten-day trip to the African continent. SEYLLOU v AFP
The United States hit its debt ceiling on Friday, and American elected officials could not agree to increase or suspend it for the time being.
A default on US debt would “certainly cause a recession in the United States and could lead to a global financial crisis,” US Treasury Secretary Janet Yellen warned on CNN on Friday. The finance minister spoke from Dakar (Senegal), where she embarked on a ten-day trip to the African continent, which will also take in Zambia and South Africa.
The United States on Friday reached its debt ceiling set by Congress at more than $31 trillion, and elected officials could not agree to increase or remove the ceiling for the time being. This event is not in itself exceptional as this cap has been the subject of legislative interference 79 times since 1960.
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But the Republican majority in the House of Representatives wants to use this issue to pressure Democrats to cut a certain number of spending, particularly those resulting from programs put in place since President Joe Biden took office, as well as taxes.
“Undermining the role of the dollar”
In the event of a US default, “our borrowing costs would rise and every American would find their costs following the same trend”. “But beyond that, failure to make payments, whether it’s on our debt obligations, to welfare recipients, or to our military, would certainly cause a recession in the United States and could lead to a global financial crisis,” asserted Janet Yellen .
“It would undoubtedly undermine the dollar’s role as a reserve currency used in transactions around the world. Many Americans would lose their jobs,” she said. Once the ceiling is reached, the US Treasury will no longer be able to borrow, even short-term, for working capital needs and has imposed a debt issuance moratorium that will last until June 5.
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“Extraordinary measures” have also been taken, including stopping payment to several pension funds and sickness or disability benefits for civil servants, technical adjustments not immediately necessary for the payment of pensions. These measures allow the US government to look forward, but may only be temporary, and if Congress fails to reach an agreement, the United States could eventually find itself in a default situation.
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