“EXTRAORDINARY MEASURES”: U.S. Hits Debt Limit Ceiling While Global Elite Meet at Davos
This year’s World Economic Forum meeting in Davos, Switzerland, was supposed to be an opportunity for leaders of developed nations to address issues like inflation, supply-chain disruptions, and the growing wealth gap. At the same time, the pressing issue of overbearing sovereign debt remains largely unaddressed.
It’s ironic and appalling at the same time, to witness global elites preaching about sound monetary policy in Switzerland while using the same old print-and-spend practices in their home countries. The current U.S. government is among the worst offenders, as America literally just exceeded its own debt limit during the Davos meeting.
It’s a shameful milestone, with U.S. sovereign debt reaching the nation’s self-imposed debt limit of $31.4 trillion. As you may be aware, the government created and spent more dollars in a matter of months during the COVID-19 crisis, than it had done in years.
This chart of the U.S. money supply tells a dire story of rampant money creation, which has led to the high consumer prices we’re all dealing with today. It’s also what enabled the extraordinary debt spending that career politicians have engaged in, but refuse to accept accountability for.
So now, the representatives on Capitol Hill must do what they have done time and again: break their previous promises by raising the nation’s debt limit. This gives politicians on both sides of the aisle an opportunity to posture and shout, claiming they won’t compromise though of course they all will in the end.
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A federal government shutdown is certainly a possibility, though these events have always been temporary. Still, they have a marked impact as federal services aren’t available during a shutdown, and it’s actually more expensive for the government to shut down for a while than it is to keep running.
The last time the U.S. government shut down was back in 2011, and this resulted in U.S. having its credit rating downgraded. The stock market also buckled, though this turned out to be a buying opportunity in the end.
Meanwhile, former Federal Reserve Chair and current Treasury Secretary Janet Yellen is urging the U.S. government to use what she calls “extraordinary measures.” Yellen is pleading: “I respectfully urge Congress to act promptly to protect the full faith and credit of the United States.”
Apparently, though, Yellen isn’t willing to wait for Congress to act. Thus, the Treasury Department is instituting its own “debt issuance suspension period,” in which the Treasury will not be able to fulfill certain investments, including to the Civil Service Retirement and Disability Fund.
So, expect ripple effects throughout the economy irrespective of whether the government raises the debt ceiling or not. Besides, Yellen ought to know that there’s no way to “protect the full faith and credit of the United States” when that faith and credit was lost many years ago.
Most likely, America’s elected officials will find a way to compromise while saving face, and Congress will give itself permission once again to spend other people’s money freely and seemingly without consequence. It was business as usual at Davos and it will be business as usual on Capitol Hill, with taxpayers footing the bill for malfeasance at the global, national, and local levels.
Chief Editor, CrushTheStreet.com
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