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Warnings: - It will be catastrophic

Warnings: – It will be catastrophic

Treasury Secretary Janet Yellen believes the US will end in a recession, a serious economic crisis, if Congress fails to raise the debt ceiling.

Obviously, that should happen no later than October 18th.

“It would be disastrous not to pay state bills, and to be in a situation where we lack the resources to pay state bills,” Yellen said. CNBC.

The Treasury Secretary has warned for several weeks that the United States will not be able to repay its debts from October 18.

So Yellen believes politicians should either raise or remove the debt ceiling by that date to avoid the United States, for the first time in history, defaulting on its debt.

Such a scenario could have dire consequences for millions of Americans.

Warning: US Treasury Secretary Janet Yellen believes the situation is now precarious. Photo: Al Drago / AFP / NTB
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sky high debt

The US government runs a budget deficit – it spends more than it gets in taxes and other income. He explains that the authorities must therefore borrow huge sums to pay their bills The New York Times.

On October 1, the national debt of the United States reached $28.8 trillion Investopedia. That’s higher than the country’s GDP in 2020, and 20 times the value of the Norwegian Petroleum Fund.

The debt ceiling is the maximum amount a state can borrow to pay its bills. Raising the debt ceiling must be approved by Congress.

The current debt ceiling is $24.4 trillion. Technically, the US hit its cap as early as July, but “extraordinary measures” have been introduced to keep paying the bills.

infects millions

Yellen warns the Senate not to wait until the “last minute” to do something about the debt ceiling, because it “could do significant damage” to business and consumer confidence in the economy, increase the cost of borrowing for taxpayers and hurt the United States. Credit rating.

If elected officials on Capitol Hill fail to resolve this tangle, it could potentially have a profound effect on the wallets of millions of Americans, Yellen writes. News letters:

The 15 million older people who rely on Social Security benefits may experience discontinuation or delays in financial support. The same applies to 30 million households, who may miss out on payments from government support programmes. American soldiers and other government employees, such as in the post office, risk not being paid.

Believe in the solution

Eric Bruce, chief strategist at Nordea, says the debt ceiling uncertainty is creating market turmoil, but “the main view in the markets is that this was resolved at the last minute.”

If there is no solution, it looks ugly, says Bruce to Bursen.

The consequences are very dire. He adds that this is the main reason I think it will be lifted at the last minute, as always.

Olaf Chen, head of global allocation and interest rates at Storebrand Asset Management, believes this will be resolved.

– This is a political game of the fair. We’ve seen this over and over again. I think there will be a solution at the last minute. Each side will have its political victories — but they will be lifted as they always did before, Chen tells Bursen.

Political Dragon Battle

The situation is still at a standstill. There is an agreement between the parties that the debt ceiling must be raised, or the risk of economic turmoil. Where Republicans and Democrats differ, it’s about How do One must raise the debt ceiling, and both are using the issue as a political weapon, CNBC writes.

Why has the situation reached a dead end?

It is the polarizing situation in the United States, where Democrats and Republicans in general do not trust each other. So the debt ceiling issue is just another question where you can pursue political tactics, Eric Lock, a US expert and consultant at Civita, tells Bursen.

Lucky doesn’t think there is anyone who thinks the debt ceiling should not be raised.

You have the Republicans who think you’re spending a lot of money, but that’s about paying the bill and the expenses that they’ve already approved, and a lot of it under Trump. Republicans have voted to raise the debt ceiling throughout Trump’s term, with the support of Democrats. This is an attempt at political tactics by Mitch McConnell and Republicans, to create a better starting point for the 2022 election.

— and he adds that Republicans have a strong interest in portraying Democrats as “big spenders,” that they spend a lot of taxpayer money, and that Republicans oppose it.

Democrats can solve it

Lökke says Republicans are very concerned about the debt ceiling and public spending when they are in opposition, but it doesn’t look the same with v.Really when they have the boss themselves.

– They are trying to portray the problems that the Democrats bear. The Democrats have a majority in Congress, and if the economy goes wrong, that is less important than Republicans winning a political point or two. But it can backfire on them, says Løkke and shoots in:

The vast majority of Republicans would easily vote to raise the debt ceiling if they could avoid announcing it.

Locke believes that the solution to this problem is now in the hands of Democrats.

– It takes a lot to not solve. The downside to not doing so is far too great, perhaps much greater than the likelihood that Republicans will say Democrats are the “big spenders,” given that Republicans have voted to increase the debt ceiling under Trump.

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