Yellen warns against a US default

A U.S. default would generate an economic and financial catastrophe. Over the past few years, American families and businesses, including many of yours, have worked hard to mount an historic economic recovery. And a default would reverse all of the hard-earned progress that we have made, and it would set us back even further. Our economy would suddenly find itself in an unprecedented economic and financial storm. Millions of American families that rely on payments for the federal government would likely go unpaid, and that ranges from 66 million Social Security beneficiaries to millions of veterans and military families who have served our country honorably.

A default could cause widespread suffering as Americans lose the income they need to get by, and the resulting income shock could lead to a recession that destroys many American jobs and businesses. A default would crack open the foundations upon which our financial system is built, and it's very conceivable that we'd see a number of financial markets break with worldwide panic-triggering margin calls, runs, and fire sales.

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