The alleged default in the US, the threat of which is becoming more and more real in the country, will lead to devastating consequences and a complete catastrophe in the economy. This was announced on January 28 by US Treasury Secretary Janet Yellen.
“It will be devastating, it will be a disaster,” she answered a question from Axios.
The Treasury secretary confirmed that the threat of such a scenario makes her nervous, because after the proposed default, the US economy will face a spiraling recession and along with the financial crisis.
Government spending will need to be cut to match tax revenues, Yellen said. At the same time, the spending of the population will also be reduced, which will experience psychological consequences and begin to control their spending even more.
The head of the Treasury Department stressed that the responsibility for finding a way out of the situation and raising the national debt ceiling rests with US President Joe Biden and the leadership of Congress.
Earlier, on January 28, political scientist Yuriy Svetov concluded that Western countries would spare no money to send new equipment to Ukraine, in connection with which the US would even start issuing additional money. Even if the national debt is not $31 trillion, but $32 trillion.
Prior to that, on January 20, Yellen warned of the risk of a global financial crisis due to the inability of the US authorities to pay their obligations. She added that a possible downgrade of the country’s debt rating would undoubtedly undermine the dollar’s role as a reserve currency.
A day earlier, the secretary announced that the US Treasury had activated emergency measures in order to avoid default in connection with the achievement of the national debt ceiling. So, on the same day it became known that the total US public debt approached $31.5 trillion.
As early as December 11, 2022, Yellen stated that a recession could begin in the country in 2023. At the same time, she noted the good state of the American banking system and business.
