U.S. Treasury Secretary Timothy Geithner told CNBC today that he is certain that congressional leaders will strike a deal to raise the federal debt ceiling prior to the Aug. 2 deadline to avoid default.

“Each side has said definitively that default is not an option,” he said, “They’re not going to play around with this.”

“If the United States of America were to default, it would be catastrophic for the American economy, for the American financial system, for the average American people, it would be a substantial unfair tax on all Americans and it would bring the world economy … to the edge of recession again,” he said. “There’s no alternative for Congress raising the debt limit, and that’s why you’re seeing Republicans as well recognize that reality and take default off the table.”

Geitner said it’s encouraging that congressional leaders are moving toward a debt agreement before the deadline, but “of course it’s not enough.”

Geithner said President Barack Obama’s administration and congressional leaders need to work toward addressing long-term deficits, while at the same time ensuring that Medicare and Social Security continue to be funded.

But the stalemate in Washington, along with debt problems in Europe, is unnerving financial markets worldwide amid fears that they could spiral into a global crisis. World stocks dipped today, and gold prices hit record highs above $1,600 an ounce as nervous investors sought a safe haven, Reuters reported.

“There’s a perfect storm happening on a global macroeconomic basis with no debt deal here and the ongoing issues in Europe, and the market is looking at all these things and is fairly anxious,” said Oliver Pursche, president of Gary Goldberg Financial Services in Suffern, N.Y.