US Treasury Secretary: 'Default is unthinkable'

Ms. Janet Yellen said that the US should never think about defaulting on its debt, if considering the economic consequences for the country itself and the world.

Speaking to reporters ahead of the meeting of finance ministers and central bank governors of the G7 countries in Niigata (Japan) on May 11, US Treasury Secretary Janet Yellen said she had read that former President Donald Trump called on Republican lawmakers to let the US default on its debt if the Democrats did not make concessions.

"Default would have a devastating impact on the US and global economies. I think we should all consider this unthinkable. America should never consider defaulting," she said.

US Treasury Secretary Janet Yellen at a press conference in Niigata on May 11. Photo: Reuters — US Treasury Secretary Janet Yellen at a press conference in Niigata on May 11. Photo: *Reuters*

In 2011, Congress reached a deal to raise the debt ceiling just two days before the Treasury Department estimated it would run out of money. Financial markets suffered their worst week since 2008. 2011 was also the first and only year the U.S. suffered a credit rating downgrade. In 2013, the debt ceiling battle even led to a government shutdown.

Asked about what steps President Joe Biden's administration might take in the event of a default, Yellen said lawmakers would have to raise the debt ceiling. "There's no perfect way to avoid a catastrophe. The only sensible thing to do is to raise the debt ceiling and prevent the worst consequences," she explained.

Yellen insisted that default was avoidable. Since 1960, Congress has raised or temporarily suspended the debt ceiling 80 times. "I urged them to act quickly once again," she said.

Yellen has repeatedly warned lawmakers of “economic disaster” if the debt ceiling is not raised in the coming weeks. In January, she told lawmakers that the government only had enough money to pay its bills until early June. The U.S. hit its debt ceiling in January. But policymakers have been unable to agree on a new debt ceiling for months.

A meeting between President Joe Biden, House Speaker Kevin McCarthy, Senate Minority Leader Mitch McConnell and several bipartisan members at the White House on May 9 failed to produce a breakthrough. The parties are expected to continue negotiating on the issue on May 12.

Ha Thu (according to CNBC)

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