The Treasury secretary, Jack Lew, warned on Thursday that the continued brinksmanship over the debt limit risks unforeseen consequences in the financial markets that could in turn lead to the US running out of cash within days.
As pressure mounted on congress to cut a deal before next Thursday's deadline for extending the federal debt limit, Lew accused Republicans of underestimating the danger of inadvertently triggering a stampede among investors that could rapidly drain remaining reserves.
More than $100bn of the US debt, known as Treasury bonds, is typically reissued every week as investors roll over their loans to the government. Typically this process is routine and does not add to the $17tn US debt pile, but simply refinances a portion of it.
But markets have already been spooked by Republican threats to refuse to extend the debt limit if they do not extract concessions on healthcare reform. Short-term borrowing costs nearly tripled in a bond auction on Tuesday as investors feared there was a risk that interest and capital repayments could be missed.
A similar wariness to roll over bonds expiring next week could exhaust a $50bn cash reserve at any point, warned Lew. "Trying to time a debt limit increase to the last minute could be very dangerous,"
Source: theguardian
