Debt Default 💵

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Debt Default

On Wednesday, Treasury Secretary Janet Yellen told congressional leaders that if the White House and Congress fail to increase the debt ceiling, the United States will default on its national debt in October.

In a letter sent out on Wednesday, Yellen predicted that the Treasury Department would run out of funds and must resort to “extraordinary” measures to keep the federal government inside its legal borrowing limit by the end of next month. For the first time in our history, she said the United States of America would be unable to pay its debts once all possible measures and cash on hand have been exhausted.

Since the federal debt ceiling was reimposed on August 1, the Treasury Department has taken extraordinary measures to avoid defaulting on the national debt.  The inability of the United States to pay its obligations might send crippling shockwaves through the financial system if the Treasury Department runs out of options.

Before the debt ceiling was reimposed in August, Yellen lobbied Congress for months to increase it, saying that a delay could cause irreversible damage to the US economy and global financial markets.

Yellen stated, “Waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States.”

She added it would be incredibly irresponsible to jeopardize the United States’ full credit at a time when American families and companies are still suffering from the impacts of the pandemic.

I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.

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