Federal Reserve Chairman Ben Bernanke said the US could lose its AAA credit rating and create a new crisis in the financial markets if it does not raise the cap on government debt.
Mr Bernanke warned that if the $14,300bn (£8,784bn) debt ceiling was not lifted quickly there could be disastrous consequences.
"Even a short suspension of payments on principal or interest on the Treasury's debt obligations could cause severe disruptions in financial markets and the payments system, induce ratings downgrades of US government debt, credit fundamental doubts about the creditworthiness of the United States, and damage the special role of the dollar and Treasury securities in global markets in the longer term," he said.
US politicians are currently locked in talks to resolve the impasse on the budget and are attempting to find trillions of dollars of savings.
In his speech in Washington yesterday, Mr Bernanke said that failing to increase the debt ceiling now would actually cause the deficit to swell in future.
"Interest rates would likely rise, slowing the recovery and, perversely, worsening the deficit problem by increasing required interest payments on the debt for what might well be a protracted period," said Mr Bernanke.The Telegraph
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http://www.telegraph.co.uk/finance/economics/8576427/Fed-chairman-Ben-Bernanke-says-US-faces-downgrade-over-debt.html
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