Congressman Jim Himes (D-CT), the ranking Democrat on the House Intelligence Committee, warned Sunday during an appearance on CNN’s “State of the Union” about the risks of the U.S. defaulting on its debt obligations. He said that Russia and China would seek to exploit the chaos resulting from a U.S. default and that the U.S. dollar’s reserve currency status could be eroded if the U.S. defaults on its debt obligations.
Avril Haines, Director of National Intelligence, informed the Senate last week that Russia and China would try to exploit the chaos resulting from a U.S. default to show that “We’re not capable of functioning as a democracy.” Himes agreed, saying: “The United States has never really come close to defaulting on its debt before. So it’s hard for us to imagine what that might look like. But, of course, it could be catastrophic.”
He further noted that “the full faith and credit of the United States is the bedrock on which the global financial system is built,” and that “all kinds of things could happen” if the U.S. debt default comes into question, such as the U.S. dollar losing its position as the global reserve currency and people choosing to invest in the United Kingdom or in the European Union, rather than the United States.
U.S. Treasury Secretary Janet Yellen said last week that the Treasury may not be able to pay all of the government’s bills as early as June 1 “if Congress does not raise or suspend the debt limit before that time.” She also warned on ABC’s “This Week” that if Congress fails to act on the debt ceiling, it could lead to a “constitutional crisis” with implications for financial markets and interest rates. Additionally, she cautioned that not raising the debt ceiling would result in a “steep economic downturn” in the U.S.
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