CNN
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Treasury Secretary Janet Yellen on Friday warned of the wider global impact that could be felt The federal government ends extraordinary measures and fails to raise the debt limit, CNN’s Christiane Amanpour reports As everyday Americans may face hard consequences
Yellen’s warning came after the US hit the $31.4 trillion debt ceiling set by Congress on Thursday. Forcing the Treasury Department to take extraordinary measures So that the government pays its bills.
While these newly deployed extraordinary measures are essentially behind-the-scenes accounting tricks, Yellen told Amanpour that “the actual date we will no longer be able to use these measures is quite uncertain, but it could probably come as early as June.”
Speaking exclusively to CNN from Senegal, Yellen said that after measures were exhausted, The United States could experience a minimal downgrading of its debt as Congress fails to raise the debt ceiling. He argued that the effects of the federal government’s failure to pay could be as wide-ranging as a “global financial crisis.”
“If that happens, our borrowing costs will go up and every American will see their borrowing costs go up as well,” Yellen said. “Furthermore, failure to make payments owed to bondholders or Social Security recipients or our military would undoubtedly cause a recession in the U.S. economy and could trigger a global financial crisis.”
“This will certainly reduce the role of the dollar as a reserve currency that is used in transactions around the world. And Americans — a lot of people will lose their jobs and of course their debt costs will go up,” he continued.
Yellen wrote a letter to House Speaker Kevin McCarthy on Thursday An explanation of the measures taken to increase pressure on Capitol Hill to avoid a catastrophic default.
Hardline Republicans have demanded that lifting the borrowing cap be tied to spending cuts. The White House countered that it would not offer or discuss raising the debt ceiling. And so far, Yellen’s warnings have failed to spark bipartisan talks, with both Republicans and Democrats reaffirming their tough stances in the past week.
As part of the moratorium on borrowing using extraordinary measures, the agency intends to sell existing investments and suspend reinvestments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefit Fund. In addition, it would suspend the reinvestment of the Federal Employees Retirement System Thrift Savings Plan, a government securities fund.
No federal retirees or employees will be affected, and funding will be completed once the impasse ends, Yellen said in the letter.
“I respectfully urge Congress to act immediately to preserve the full faith and credit of the United States,” he wrote.
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