Yellen: "Failure to Raise Debt Ceiling Will Lead to Recession"

Emphasis on Need for Negotiations by the 18th
Concerns Over Avoiding Debt Ceiling Increase Raised Again

[Image source=EPA Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Janet Yellen, U.S. Treasury Secretary, warned that if the federal debt ceiling is not raised by the 18th of this month, a recession must be expected.

In an interview with CNBC on the 5th (local time), Secretary Yellen said, "If we find ourselves in a situation where the federal government lacks the funds to pay its bills, a tragic outcome will occur."

She further expressed concern that if a default becomes a reality, it "will trigger a recession."

In the interview, Secretary Yellen stated, "U.S. Treasury securities have long been considered the safest assets on Earth. One reason is the dollar's status as the global reserve currency," adding, "Failing to pay maturing government bills and thereby creating uncertainty would have catastrophic consequences."

Secretary Yellen has gradually raised her level of concern as negotiations over raising the debt ceiling have stalled. She had previously warned that the U.S. would enter default by the 18th, causing serious consequences for the U.S. economy, but this time she even used the term recession.

The U.S. Congress dramatically passed a temporary budget to prevent a federal government shutdown scheduled from the 1st, but negotiations to raise the debt ceiling have shown little progress.

Confusion continues as disagreements persist not only between the parties but also within the Democratic Party over raising the debt ceiling and President Biden’s $4 trillion infrastructure investment budget plan.

President Biden met with progressive lawmakers the day before and met with moderate lawmakers on this day to discuss the infrastructure budget plan, but the budget process remains in a deadlock.

Senate Minority Leader Mitch McConnell of the Republican Party also maintains a hardline stance, saying, "I cannot agree because raising the debt ceiling will increase government spending."

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