White House openly threatens US default as debt fight escalates

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.

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.

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)

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