Yellen: US default could cause global financial crisis
US Treasury Secretary Janet Yellen stated that if the debt limit is not increased, the default of the USA may lead to a global financial crisis and the reserve currency role of the US dollar may be damaged.
Yellen made evaluations about the economy in an interview with CNN television.
Regarding the federal government’s 31.4 trillion dollar debt limit in the US, Yellen said that the US Treasury Department has started to implement extraordinary measures, that these measures will continue until the beginning of June, but there is still no guarantee of this.
Yellen, emphasizing that the USA has been a country that has fulfilled all its financial obligations since 1789, stated that the confidence of the US government that it can always pay its debts forms the basis of the global financial system, and that US Treasury bonds are the “safe” assets.
Evaluating the consequences of a possible default by the US, Yellen said, “It will undoubtedly cause a recession in the US economy and may cause a global financial crisis. It will definitely undermine the role of the dollar as a reserve currency.” she said.
Yellen said that raising the debt limit is a “non-negotiable or negotiable” issue. he said.
“Supply chain bottlenecks that increase inflation have been resolved”
Referring to the high inflation in the country, Yellen said that the progress they have made in the fight against inflation encourages her.
“I think we’ve seen really good progress on inflation in the US,” Yellen said.
Stating that inflation continues to be a concern for households, Yellen said that supply chain bottlenecks that drive inflation have been resolved.
Stressing that the Federal Reserve is independent and cannot comment on its policies, Yellen said, “I think they are trying to do what they think is necessary to maintain a strong labor market and at the same time ensure that inflation continues to fall.”
Evaluating the meeting with Liu Hı, China’s Deputy Prime Minister responsible for foreign trade and international economic relations, this week, Yellen noted that the world’s two most important economies have a responsibility to cooperate on issues of global importance, including climate change. “We discussed our cooperation and determination to work together to overcome global challenges,” Yellen said.