US Treasury Secretary Jacob Lew has issued a categorical warning that the United States will default on its $16.7 trillion debt and throw the world into turmoil unless Congress agrees to raise the legal debt ceiling by October 17.
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Mr Lew said the treasury had already exhausted its normal funds in May and has been “creating room” by resorting to one-off tricks, but these, too, have run dry. The government will have just $30bn by October 17, half what is needed to cover immediate needs over subsequent days.
“That is a dangerously low level of cash, and we’re on the verge of going into a place we’ve never been. Even getting close to the line is dangerous,” he said.
Mr Lew’s dramatic comments mark a further escalation in the game of chicken on Capitol Hill. They suggest that the White House has for now ruled out a drastic fiscal squeeze to balance the books if there is no deal, and is unwilling to contemplate exotic loopholes – such as a $2 trillion platinum coin – to circumvent the will of Congress.
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The US Treasury warned last week that the dispute could lead to a “catastrophic” collapse. “Credit markets could freeze, the value of the dollar could plummet, US interest rates could skyrocket, potentially resulting in a financial crisis and recession that could echo the events of 2008 or worse,” it said.
Full article: White House openly threatens US default as debt fight escalates (The Telegraph)
