US Treasury Secretary, Janet Yellen, on Tuesday warned that failure to raise the country’s debt limit could hurt the dollar reserves level and by implication push the economy on a recessionary trend.
This is even as she maintained that she still regarded October 18 as the debt limit deadline, adding that it is now up to US House of Representatives Speaker, Nancy Pelosi and Senate Democratic leader, Chuck Schumer, to think out on how to raise the limit in Congress.
Moreover, Yellen noted that she supports bipartisan action to solve that issue.
The Treasury Secretary was quoted by CNBC in an interview as saying that failure of Congress to act would be “catastrophic”, stressing that “it is utterly essential that this be done.”
Meanwhile, Senate Majority Leader, Chuck Schumer, is taking steps to have the Senate pass a legislation to deal with the debt limit, but strong Republicans’ opposition is forcing Democrats to consider using a special “reconciliation” vehicle so the measure could pass without any GOP support.
While dismissing the idea floated that the government could mint a trillion dollar coin to pay off some of the debt, Yellen said it was a “gimmick” and that doing so would be tantamount to “asking the Federal Reserve to print money to cover deficits that Congress is unwilling to cover.”
According to her, such a step would compromise the independence of the Fed and indicate that Congress and the executive branch can’t be counted on to pay the nation’s bills.
Commenting on the economy, the Treasury Secretary explained that inflation pressures remained “transitory but that doesn’t mean they will go away over the next several months”, adding that she trusts “the Fed to make the right decisions.”
