The US government has no more borrowing power and is trying to avoid default
Treasury Secretary Janet Yellen warned in a January 19 letter to Congress that the US debt ceiling had been reached: the countdown had begun. “emergency measures” so the government can continue to pay its bills, public radio reports NPR.
From Senegal, where she is on an official visit on Friday, Ms. Yellen warned that the United States could face a recession and “It causes the global financial crisis” A payment default — the first in history — will happen if Congress doesn’t lift the cap in time. “It could happen in early June” the American economy minister trusted the TV channel CNN.
“If that happens, our borrowing costs and every American’s will go up.”, he continued at the microphone of CNN journalist Christian Amanpour. In addition to, “A default on debt owed to bondholders, Social Security recipients, or our military would certainly trigger a recession in the U.S. economy, as well as a global financial crisis.” To finish this whiteboard, “This will certainly undermine the role of the dollar as a reserve currency used in transactions around the world.”he added.
Accounting measures to save time
What are these”emergency measures” Which will the Treasury use to delay this bleak outlook? Washington news site Hill list some of these accounting maneuvers, such as “selling investments to raise cash” or “stopping new investments (various) Pension fund of civil servants” in order not to create new debts.
But this is only a “respite“, warns Hillreminds us that if several of Yellen’s predecessors were to follow her “similar way“, MPs always “find a solution“. This is especially true in 1995, 2011, 2013, or 2021, each time during a Democratic presidency held hostage by a Republican Congress… Each time a “mixed success” he remembers for the latter Washington post. Will it be the same this time?
Nothing is less certain. Because according to the House of Representatives, which demonstrated its radicalism and taste for chaos during the election of the speaker in early January, the current situation seems more fiery than before. Incumbent Republicans, Judge Paul Krugman New York Times“Make the Tea Party look like reasonable people using the debt ceiling to blackmail Obama“. The Nobel Prize in Economics worries that “A significant number of caucus members may want a crisis to ‘watch the world burn’ under a Democratic administration.”
There are no negotiations with “economic terrorists”.
exactly”As part of Republican leader Kevin McCarthy’s Faustian pact with members of the Freedom Caucus (far right) in order to be elected speaker, he would agree to tie the cap increase to federal spending cuts.” he explains The New Yorker. This is especially true of social costs.
He recently proposed a new mechanism calledabsurd“By Paul Krugman – so if the ceiling is breached, “certain costs are preferred” he announced Washington post January 13. Janet Yellen strongly opposed it and said her department did not “systems prioritizing debt payments“, reports with reference to the political information website Axios. Joe Biden also said today that soontalk about it a little” With Kevin McCarthy, reports Politics.
What if all negotiations fail? Above all, we shouldn’tdon’t try to appease the economic terrorists” Krugman asserts vehemently. Economist columnist New York Times suggests three ways for government to avoid disaster: the first is a legislative technique that “It would require the support of a handful of sane members of the Republican caucus“; the second is a priori extravagant, but “almost legalwill consist of “, “minting a platinum coin with a face value of, say, $1 trillion“; the third, finally, would be financial trickery in the bond market. And to conclude:
“If it takes gimmicks to thwart the schemes of destructive extremists fueled by legal drunkenness, and thereby avert financial disaster, so be it.”