FINANCE

Janet Yellen has warned of the risk of the U.S. running out of money by October 18th


Treasury Secretary Janet Yellen warned that the United States risked running out of money before its joint congressional hearing with Federal Reserve Chairman Jay Powell on Tuesday.

“At that point, we hope the Treasury will leave very limited resources that will run out quickly,” he said in a letter to congressional leaders. “It is uncertain whether we will be able to fulfill the promises of all nations after that date.

“We know from previous debt limitations that waiting until the last minute can severely damage business and consumer confidence, increase orrowing costs for taxpayers and negatively affect U.S. credit ratings over the next few years,” he wrote.

“Failure to act immediately can also cause significant disruption to financial markets, as uncertainty can lead to increased instability and loss of investor confidence.”

Yellen reiterated his warning while testifying before the Senate Banking Committee.

“I am just worried. . . It would erode confidence in the dollar as a reserve currency and allow ordinary Americans to pay interest on their mortgages and on their cars and on their credit cards, all in line with higher Treasury costs, ”he said.

Towards the end of Monday, a bill to increase the U.S. orrow’s limit failed to pass the Senate’s 60-vote Philistine threshold, a move Republicans in the upper house of Congress rejected.

Democrats, who control the Senate by the lowest margins, are now under pressure to raise the arrow limit and avoid an official shutdown before Friday’s 12.01 deadline.

In a heated exchange with Louisiana Republican Senator John Kennedy, why Democrats are not pushing the debt limit themselves, Yellen cited previous examples when Democrats worked with Republicans to raise the federal arrow limit. He said it was a “shared responsibility” to do so.

Asked about possible contingency plans before the Fed defaulted, including buying central bank default treasury and selling Fed-owned securities, Powell said the limited power of the central bank was a loss. “These are things we don’t really want to do,” he said. Said.

Other top Fed officials also recently warned lawmakers if no agreement is reached.

On Monday, John Williams, president of the Federal Reserve Bank of New York, said investors could be “extremely panicked”, leading to “extreme reactions in the market.”

Federal Reserve Governor Leal Brennard also called on lawmakers to work Monday, saying Congress must “move forward,” when Powell described the possibility of “serious damage” to the United States’ performance last week.

Business leaders have also expressed concern about potential defaulters. Failure to raise the U.S. debt limit would pose an “unacceptable” risk to the U.S. economy, Washington’s top business lobby group warned Tuesday.

The Business Roundtable, which represents more than 200 chief executives of some of the largest companies in the United States, called on lawmakers to “get it done,” adding that “this is not a default risk acceptable.”

BRT chief executive Joshua Bolten said: “We would be happy to see this done on a bilateral basis, but if it has to be done on a partisan basis, then so be it.”

Jamie Damon, chief executive of JPMorgan Chase, the largest bank in the United States, told Reuters on Tuesday that financial lenders have begun preparing for “potential catastrophic events” in the financial markets, client agreements and capital adequacy ratio.

“Every time it comes, it settles down, but we should never stop it. I just think this whole thing is wrong and one day we should just have a bilateral bill and get rid of the debt limit. It’s all politics, “Daemon said in an interview.

In his testimony to the committee on Tuesday, Powell warned that the price pressures raised by epidemic-related disruptions lasted longer than expected.

Powell acknowledged that the economy is getting stronger, but warned about the risks that inflation could last longer than expected because the more contagious delta coronavirus further affects alternative supply.

“As reopening continues, barriers, hiring difficulties and other constraints may again be higher and more projected than expected, which increases the risk of inflation,” he said.

“If stable high inflation becomes a serious concern, we must respond and use our tools to ensure that inflation is consistent with our target.”

His comments come after last week’s monetary policy meeting, where the Fed indicated it would soon begin to decline, or “taper”, a মাসের 120 million one-month asset purchase program that was launched last year and promised an average inflation rate of 2% and a maximum. Employment needs to continue until “significant further progress” is made.

Estimates released last week suggested that more Fed officials now believe interest rate hikes could be appropriate next year, with at least three increases by 2023.

Additional report by Joshua Franklin in New York



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