– Yellen: “We Have To Default On Something” If No Debt Ceiling Deal:
Janet Yellen delivered some great news today: in an interview with
Bloomberg TV, the Treasury Secretary and former Fed chair, who has been desperately fearmongering to present the most terrifying “fire and brimstone” scenario imaginable should Congress Republicans refuse to yield to Biden on debt ceiling negotiations, said that the federal government will have to renege on some payments if Congress doesn’t raise the debt limit, though no plan on how the department would proceed has yet been presented to President Joe Biden. Which, of course, is great news for the US which is already suffering under an unprecedented, unsustainable debt load, because while the US can easily prioritize debt payments, much of the massive bureaucratic and Deep State bloat in the form of 20+ million government workers would finally be relieved if only temporarily.
“If Congress fails to do that, it really impairs our credit rating. We have to default on some obligation, whether it’s Treasuries or payments to Social Security recipients,” Yellen said Friday in an interview with Bloomberg Television. “That’s something America hasn’t done since 1789. And we shouldn’t start now. So we’ve not discussed what to do.”
Yellen was pressed on whether the assumption of many market participants that the Treasury would prioritize payments of interest and principal on Treasury securities was accurate. That presumption is based on discussions between Federal Reserve and Treasury officials during the 2011 debt-limit showdown, revealed in a transcript of a Fed policymaker discussion.
“My understanding — I was at the Fed in 2011 — is that this plan was never presented to the president and never approved,” said Yellen, who was vice chair of the Fed at that time.
As TD’s Priya Misra wrote earlier this week, historically the Treasury has openly rejected the idea of payment prioritization as operationally impossible. Although this idea resurfaced during each recent debt ceiling crisis thus far, both Treasury Secretaries Lew and Mnuchin rejected the idea of prioritization. Yellen also rejected the idea that prioritizing payments as a viable solution.
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