(AmericanProsperity.com) – Federal Reserve Chairman Jerome Powell said on Wednesday that US lawmakers need to raise the debt ceiling to prevent a default, which would represent an unprecedented situation in the United States. Powell made the comments during a House Financial Service Committee hearing amid recession fears and prolonged inflation, raising concerns about the current state of the economy and the way raising the debt ceiling could have unexpected consequences not only in the country but also in many other nations around the world.
Lawmakers were questioning Powell on different issues, such as the debt ceiling standoff, inflation and the hegemony of the US dollar as the preferred reserve currency in world finance and global trade. In the hearing, he claimed that no one should assume that the Federal Reserve has the ability to shield the American economy from the government’s failure to pay its bill, and even more so in a debt default scenario.
He also rejected the notion that the Treasury could somehow create a coin worth a trillion dollars and deposit it with the Federal Reserve in order to avert a debt default, claiming there are no tricks or easy solutions to solve the current economic situation the US is experiencing. Treasury Secretary Janet Yellen also dismissed the idea after Utah Republican Senator Mike Lee introduced a bill last week to prevent the controversial coin.
As reported by numerous media outlets, the United States will default on its debt in the summer if the House of Representatives fails to pass a bill to raise the country’s borrowing limit. Republican lawmakers have said they will support the raise if Democratic lawmakers endorse cost-cutting measures, which they have been unwilling to do so far.
According to a recent analysis from Moody’s, a debt default in the United States would result in the loss of 6 million jobs, and could even damage the country’s credibility with world borrowers.
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