U.S. Treasury Secretary Janet Yellen on Tuesday delivered an urgent call for Congress to raise the government’s borrowing limit, a day after Senate Republicans refused to consider a bill that would do so.
Failure to raise the debt ceiling is likely to boost interest rates, increasing the government’s interest payments on the national debt, Yellen said.
“It’s like 2011, when Congress didn’t seem to be raising the debt ceiling and we couldn’t pay the bills, and eventually there was a spike in interest rates. If the debt ceiling is not raised, I think there will be a financial crisis and disaster. And of course, it’s true to say that interest payments on government debt will increase,” he explained.
He added, “I am concerned about the value of the dollar and US Treasury assets being rated as the safest in the world and serving as a reserve currency. This will undermine confidence in the dollar as a reserve currency and interest payments on home, auto and mortgage loans. credit cards all of which will skyrocket with higher borrowing costs, and of course this will also increase our spending.” [em/jm/np]