US Secretary of the Treasury Janet Yellen warned on Friday that the US could see a recession and “cause a global financial crisis” if it defaults on payments, as Congress heads toward a clash over raising the debt limit.
Yellen’s comments to CNN in Senegal come as the US Treasury started taking “extraordinary measures” this week to avert a default as the country reached its US$31.4 trillion debt ceiling.
However, such tools can only help for a limited time, likely no longer than six months, according to the Treasury.
Photo: AFP
Yellen said that the actual day on which the Treasury would no longer be able to use these measures is “quite uncertain,” and could come as early as June.
If the measures were exhausted and Congress fails to raise the debt limit, the US could see a downgrading of its debt “at minimum,” Yellen said.
“If that happened, our borrowing costs would increase, and every American would see that their borrowing costs would increase as well,” she added.
“On top of that, a failure to make payments that are due, whether it’s to bondholders or to social security recipients, or to our military, would undoubtedly cause a recession in the US economy and could cause a global financial crisis,” Yellen said.
This would also undermine the role of the US dollar as a reserve currency used in transactions globally.
The world’s biggest economy is bracing for a drawn out battle in Congress, as Republicans threaten to block the usual annual rubber stamping of a rise in the debt ceiling.
With new control over the US House after last year’s midterm elections, Republicans want Democratic President Joe Biden to agree to slash government spending, which they view as having risen to unsustainable heights.
The White House said cuts of the size Republicans demand would have to come from politically sensitive social security and military spending programs, or involve major new taxes.
It added that Biden would not negotiate with hardline Republicans over their “risky and dangerous” opposition to increased borrowing for programs Congress already authorized.
Japanese Prime Minister Sanae Takaichi has talked up the benefits of a weaker yen in a campaign speech, adopting a tone at odds with her finance ministry, which has refused to rule out any options to counter excessive foreign exchange volatility. Takaichi later softened her stance, saying she did not have a preference for the yen’s direction. “People say the weak yen is bad right now, but for export industries, it’s a major opportunity,” Takaichi said on Saturday at a rally for Liberal Democratic Party candidate Daishiro Yamagiwa in Kanagawa Prefecture ahead of a snap election on Sunday. “Whether it’s selling food or
CONCERNS: Tech companies investing in AI businesses that purchase their products have raised questions among investors that they are artificially propping up demand Nvidia Corp chief executive officer Jensen Huang (黃仁勳) on Saturday said that the company would be participating in OpenAI’s latest funding round, describing it as potentially “the largest investment we’ve ever made.” “We will invest a great deal of money,” Huang told reporters while visiting Taipei. “I believe in OpenAI. The work that they do is incredible. They’re one of the most consequential companies of our time.” Huang did not say exactly how much Nvidia might contribute, but described the investment as “huge.” “Let Sam announce how much he’s going to raise — it’s for him to decide,” Huang said, referring to OpenAI
CHIP HANG-UP: Surging memorychip prices would deal a blow to smartphone sales this year, potentially hindering one of MediaTek’s biggest sources of revenue MediaTek Inc (聯發科), the world’s biggest smartphone chip designer, yesterday said its new artificial intelligence (AI) chips used in data centers are to account for 20 percent of its total revenue next year, as cloud service providers race to deploy AI infrastructure to meet voracious demand. MediaTek is believed to be developing tensor processing units for Google, which are used in AI applications. While it did not confirm such reports, MediaTek said its new application-specific IC (ASIC) business would be a new growth engine for the company. It again hiked its forecast for the addressable ASIC market to US$70 billion by 2028, compared
SIGNS OF STABILITY: With US tariff risks to GDP subsiding, reliable economic conditions are expected to reinforce the bank operating environment, Fitch said Fitch Ratings has upgraded the outlook for Taiwan’s banking sector to “neutral” from “deteriorating,” citing a tariff agreement with the US that has reduced uncertainty in Taiwan’s macroeconomic environment and stabilized financial performance. The US on Jan. 15 agreed to lower tariffs on Taiwanese goods from 20 percent to 15 percent, without stacking them on existing most-favored-nation rates, placing Taiwan on equal footing with major competitors such as Japan, South Korea and the EU. The deal also grants Taiwan-made semiconductors and related products most-favorable-nation treatment under Section 232 of the US Trade Expansion Act. Under the agreement, Taiwanese semiconductor, electronics manufacturing service, artificial
RSS