US President Barack Obama appealed to Americans to press Republicans to compromise on a debt deal, warning in a primetime televised speech that a default would risk "a deep economic crisis."
As Obama spoke from the East Room of the White House, the dollar plunged to a four month low in Tokyo amid growing jitters as the impasse between Republicans and Democrats over the US debt crisis deepened.
Obama cast the blame for the stalemate on Republicans' refusal to raise the $14.3 trillion debt ceiling unless there is agreement to make deep spending cuts without increases in taxes on the wealthy.
Failure to compromise, he said, "would risk sparking a deep economic crisis -- one caused almost entirely by Washington."
But he rejected a Republican proposal for a temporary increase in the debt limit, arguing it would leave the underlying problem unresolved and lead to a repeat of the current crisis in six months.
"That is no way to run the greatest country on Earth. It is a dangerous game we've never played before, and we can't afford to play it now. Not when the jobs and livelihoods of so many families are at stake," he said.
But with a potential US default looming in eight days time, Obama appealed to Americans to "make your voice heard."
"If you want a balanced approach to reducing the deficit, let your member of Congress know. If you believe we can solve this problem through compromise, send that message," he said.
Obama's 9:00 pm (0100 GMT) speech was only his seventh formal address to the nation, and the first since he unveiled a timeline for a US troop withdrawal from Afghanistan in June.
The top Republican leader in Congress, John Boehner, responded by blaming Obama for the crisis, and warned that while the United States "cannot default on its debt obligations," Americans would demand deep cuts in spending.
The prospect of the world's richest country running out of cash to pay its bills come August 2 sent stocks sliding and gold soaring while the IMF warned of a "severe shock" to the world economy absent an elusive breakthrough.
Washington hit its debt ceiling on May 16 but has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally but can only do so through August 2.
At that point, US leaders will face an agonizing choice about cutting an estimated 40 cents of every dollar in spending and defaulting either on debt payments or on other obligations like government health or retirement benefits.
Finance and business leaders have warned that failure to raise the US debt ceiling by then would send shockwaves through the fragile world economy, while Obama has predicted a default would trigger economic "Armageddon."
All sides in the dispute agree Washington must reduce its deficit but disagree on the size and blend of spending cuts and revenue increases as well as on how and whether to slice into the social safety net.
"We need to make the right decision now, and we need to do it because the economy is on the line," Democratic Senate Majority Leader Harry Reid warned with the polarized US Congress seemingly no nearer to a breakthrough.
Reid and Boehner, the speaker of the House of Representatives, have presented rival strategies to raise the US debt limit, deflate the swollen US budget deficit, and ensure Washington can continue to pay its bills.
The plans differed in one critical, politically divisive aspect: Reid's would meet Obama's goal of raising the debt ceiling enough to avoid another politically painful standoff before his November 2012 re-election bid.
Boehner -- who has flatly rejected Obama's call for tax hikes on the rich and on wealthy corporations -- envisioned a two-step process with increases first to February or March 2012, and later to 2013.
"Time is running short and it would be irresponsible for the president to veto this common-sense plan and run the risk of default. I would encourage the Senate to pass this plan and the president to sign it," said Boehner.
Weighed down by the impasse, US stock markets fell and safe-haven Swiss francs soared amid worries about both the dollar and the euro, while gold climbed to a record $1,624 an ounce before falling back slightly to $1,614.
The dollar lost 1.6 percent to the Swiss franc while US Treasury prices fell -- though not enough to signal panic in the bond markets. The yield on the 10-year Treasury rose to 3.00 percent from 2.96 percent late on Friday.
"The odds that the United States will face a ratings downgrade, even if the debt ceiling is raised, have clearly risen," said Nigel Gault of IHS Global Insight, referring to Washington's sterling Triple-A debt rating.
US Secretary of State Hillary Clinton promised during a trip to Asia that "intense" wrangling among the White House, its Democratic allies, and Republican foes would reach an 11th-hour compromise.
The International Monetary Fund pressed US politicians to raise the debt ceiling "expeditiously to avoid a severe shock to the US economy and world financial markets" with the deadline now looming large.
The IMF warned that US debt would total 99 percent of the size of the US economy this year and 103.0 percent in 2012, and urged a blend of spending cuts, tax revenue increases, and reductions in cherished social safety net programs.