Biden Warns Not Raising Debt Ceiling Would Threaten Reserve Status of US Dollar

© REUTERS / JONATHAN ERNSTU.S. President Joe Biden delivers remarks on the U.S. debt ceiling from the State Dining Room of the White House in Washington, U.S. October 4, 2021. REUTERS/Jonathan Ernst
U.S. President Joe Biden delivers remarks on the U.S. debt ceiling from the State Dining Room of the White House in Washington, U.S. October 4, 2021. REUTERS/Jonathan Ernst - Sputnik International, 1920, 04.10.2021
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Washington has two weeks before the US Treasury exceeds its extraordinary measures to avoid defaulting on its obligations due to the country hitting the debt ceiling.
US President Joe Biden has pleaded with the Republican Party to agree to vote in favour of raising the country's debt ceiling before it defaults on its financial obligations, citing the risks of the US dollar losing its international status as a reserve currency. POTUS also warned such an outcome would undermine the reliability of US Treasury securities and hurt America's economy.
"This is going to undermine the safety of US Treasury securities, and it will threaten the reserve status of the dollar as the world's currency that the world relies on. American credit rating will be downgraded, interest rates will rise for mortgages, auto loans, credit cards, borrowing".
U.S. President Joe Biden clears his throat as he delivers remarks on the economy during a speech in the East Room of the White House in Washington, U.S., September 16, 2021 - Sputnik International
Joe Biden
US President
The president described the GOP's position as "reckless and dangerous" and urged them to "get out of the way" and let the Democrats raise the debt ceiling. Biden added that he can't guarantee that the US won't default on its debt and promised to discuss the issue with the GOP Senate Leader Mitch McConnell. The latter said earlier in the day that the Democrats do not need the Republicans' help to raise the debt ceiling.
"No I can't [guarantee the US won't default on its debt]. That's up to Mitch McConnell. If I could, I would," Biden said answering a question about the possibility of the worst-case scenario.
US Treasury Secretary Janet Yellen predicted that the default on $28.4 trillion debt might happen as early as 18 October, when the Treasury exceeds all available extraordinary measures. To avert such a calamity, the US lawmakers must either raise the debt ceiling, which dictates how much the government can borrow, or temporarily suspend it.
The Republicans in Congress refused to vote in favour of the bill to raise the limit, saying that they won't take part in a move, which was purportedly prompted by the Democrats' uncontrolled spending spree. The GOP lawmakers further pointed out that the Democratic Party has the option of passing the bill unilaterally via the budget reconciliation – a Senate procedure protected against filibuster by the other party. The Democrats, however, are refusing to resort to this option demanding that the GOP should be on board with the decision.
A family's stimulus check from the U.S. Treasury for the coronavirus disease (COVID-19) aid arrived in the mail in Milton, Massachusetts, U.S., March 25, 2021 - Sputnik International, 1920, 01.10.2021
What Will Happen if US Congress Fails to Act on Debt Ceiling by Mid-October?
The debt ceiling limits the US Treasury's ability to pay for government spending and obligations. The country has hit the ceiling and come near to defaulting several times in the past, but it has always avoided the grim scenario. However, it was so close to failing to reach an agreement in 2011 that several rating agencies, including S&P, briefly downgraded the US credit rating – for the first time in history.
The brief downgrade led to the Dow Jones index losing 2,000 points, with all-out default of the US predicted by Moody's to result in a 4 percent decline in economic activity, growth in unemployment and $15 trillion loss in household wealth, as well as soaring interest rates.
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