U.S. Treasury Secretary Yellen warns: failure to raise the debt ceiling will trigger an economic disaster

If you are a small investor and would like to make a recommendation to trade based on the content of the following article, you may consider the following:

  • The issue of the U.S. debt ceiling could lead to a weaker dollar, stronger gold and more volatile U.S. stocks. You can adjust your positions and trade direction according to your risk appetite and investment objectives.
  • If you think the U.S. government can eventually resolve the debt ceiling issue and have confidence in the U.S. economic recovery, you can buy some U.S. stocks with growth and quality fundamentals, such as technology stocks and consumer stocks, at low levels.
  • If you think the U.S. government may default or extend the time to resolve the debt ceiling and are pessimistic about the U.S. economic outlook, you can sell some U.S. stocks that are highly affected by interest rates or overvalued, such as financial stocks, energy stocks, etc. at a high price.

For the original article, please refer to the following:

(Caixin) April 26 (Editor Xia Junxiong) Tuesday (April 25) local time, U.S. Treasury Secretary Yellen warned that if Congress fails to raise the federal government’s debt ceiling, and the resulting default, it will trigger an economic disaster that will lead to higher interest rates in the coming years.

In January, the U.S. federal government debt reached the legal limit of about $31.4 trillion. The U.S. Treasury then deployed so-called extraordinary measures to temporarily avoid a debt default, specifically including a moratorium on investments in certain government accounts that would allow the Treasury to continue making payments to bondholders, Social Security beneficiaries and others.

Yellen told members of Congress in January that the above measures would last until about early June without raising the debt ceiling. That means the Biden administration and Congress have about five months to pass legislation to raise or suspend the debt ceiling.

However, since late January, the Democrats and Republicans have been tearing around the issue of raising the debt ceiling and have not been able to reach agreement.

Yellen said Tuesday that raising or suspending the debt ceiling is a fundamental responsibility of Congress, and that a default on the debt would threaten the economic achievements of the United States since the new crown pandemic.

Yellen warned that “a debt default would lead to an economic and financial disaster that would permanently raise the cost of borrowing and the cost of future investments would rise sharply.”

She noted that if the debt ceiling is not raised, U.S. businesses will face deteriorating credit markets and the government may not be able to make payments to military dependents and seniors who rely on Social Security.”

Yellen called out, “Congress must vote to raise or suspend the debt ceiling, it should do so unconditionally, and it should not wait until the last minute.”

U.S. Rep. Speaker McCarthy introduced a bill last week that would raise the debt ceiling by $1.5 trillion or extend it through the end of March 2024 on the condition that $4.5 trillion in spending cuts are made, including ending clean energy subsidies provided by the Inflation Reduction Act, halting the Biden administration’s plan to forgive some student loans, and recouping unused New Crown Outbreak Relief payments.

In short, McCarthy’s proposal calls for calling a halt to a series of signature achievements during Biden’s tenure, and naturally Biden and the Democrats will not agree to this proposal.

According to the White House’s statement, Biden is expected to veto McCarthy’s debt ceiling plan.

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