US Treasury Secretary Janet Yellen has warned that if Congress fails to raise the current public debt ceiling, the administration will run out of resources. According to her estimates, it will take place on October 18. Republicans blocked raising the cap in the Senate on Monday.
“It is uncertain whether we will still be able to meet all of the state’s obligations after this date,” Yellen wrote in a letter to members of Congress. It stipulated that the date of October 18 is based solely on estimates of variable cash flows. Yellen had previously warned that failure to raise the cap would mean “a financial crisis and catastrophe”.
Increasing the public debt limit in the United States
The message was sent after Republican senators on Monday blocked a bill containing a provision to suspend the current limit along with an interim budget that would ensure a short-term continuation of the existing budget. This temporary budget must be approved by the end of the current fiscal year – which ends on Thursday at the end of September – to avoid so-called shutdowns, meaning the closure of most federal institutions.
Republicans said they would support a short-term budget alone, but not in conjunction with suspending the debt limit. Senator Mitt Romney suggested that Democrats could raise the bar themselves by joining him with a giant $3.5 trillion welfare extension bill. The ruling party does not need Republican votes to pass this bill, but the bill is subject to heated debate within the Democratic Party, and it is not known if it will pass before October 18.
Raising the debt ceiling and the platinum currency
All of this means that the issue of raising the debt limit is not a foregone conclusion, and the risk of official bankruptcy may be higher this time than ever.
The issue of raising the debt ceiling for many years in the United States was essentially a formality, but in the face of the political polarization of the past decade, there have been many controversies on the subject. Faced with dire consequences for the economy, a compromise was eventually reached each time.
These controversies fuel the debate over the complete abolition of the debt ceiling. According to some economists, such as Nobel laureate Paul Krugman, a way to circumvent borders and regular crises can be, for example, minting a trillion-dollar platinum coin, with which the state can repay its debts.
Main image source: PAP / EPA / KEVIN DIETSCH / POOL
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