Failure to raise the debt ceiling would cause “an economic catastrophe,” US Treasury Secretary Janet Yellen told CNBC on Monday.
“It’s something that could cause economic chaos, drastically reduce consumption and mean that Social Security recipients, veterans and those with government contracts would no longer be able to pay their bills.”
Yellen’s statements come amid deadlock in political negotiations to raise the public debt ceiling. This has the Treasury Department preparing for the worst possible scenario: US default.
Bankruptcy would happen if the measures taken by the treasury since the beginning of the year no longer have an effect and the US reaches its public debt limit of 31.4 trillion dollars.
To avoid a default, Congress must either raise the cap or temporarily suspend its application before the Treasury runs out of money.
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