Yellen Warns 'Extraordinary Measures' Will Be Needed to Avoid Default.

[elleng]

The Treasury secretary urged Congress to protect the full faith and credit of the United States by raising the debt limit.

'Treasury Secretary Janet L. Yellen informed Congress on Friday that if lawmakers do not act to raise or suspend the nation’s debt limit as soon as Jan. 14 she would most likely need to begin using “extraordinary measures” to prevent the United States from defaulting on its debt.

Ms. Yellen issued her warning about the debt limit — which caps the amount of money that the United States is authorized to borrow to fund the government and meet its financial obligations — at a fractious political moment. Republicans are set to take control of Washington next month, and President-elect Donald J. Trump has already called on Congress to abolish the debt limit before he seeks to push through a new round of tax cuts and other spending priorities.

The debt limit was suspended in June 2023 after a contentious negotiation over federal spending, work requirements for receiving government benefits and funding for the Internal Revenue Service. That suspension is scheduled to expire on Jan. 2, forcing Treasury to begin using so-called extraordinary measures to allow the federal government to keep paying its bills.

Those measures are essentially accounting maneuvers that keep the government from breaching the debt limit.'>>>

https://www.nytimes.com/2024/12/27/business/economy/yellen-debt-limit-warning-congress.html

[jimfields33]

1. What? That was just voted down.

Why not say something last week?

[Trexmaster]

2. My suspicion

Last edited Mon Dec 30, 2024, 04:17 PM - Edit history (1)

I don't think it's anything particular nefarious but playing the usual hysterical politicking theater. Dog and pony politics: https://en.wikipedia.org/wiki/Dog_and_pony_show

I definitely don't think Janet Yellen, Jerome Powell, or anybody else within the mechanisms, really enjoys this periodical “The sky is falling!!!” crap noise, which they already know how it goes. Everybody looks burned out of this ritualistic crap-creek that occurs periodical like this, at this point, and I won't believe otherwise.

This is the same re-run I've read in different periods of times in the past over, and over, and over, and over again. This' just a lukewarm re-run.

It'll pass more than likely.
IF NOT, these are the extraordinary measures she hints about, [highlightquote] (I don't know if the source is legit, it's the only source I found quickly that details [highlightwhat these measures are]):

• Declare a “debt issuance suspension period” for the Civil Service Retirement and Disability Fund as well as the Postal Service Retiree Health Benefits Fund. The Treasury’s declaration of a debt issuance suspension period only applies to those two funds and allows the agency to suspend new investments as well as redeem certain existing investments in the funds earlier than scheduled

• Suspend reinvestment in the Government Securities Investment Fund (G Fund), a retirement fund for federal employees. The G Fund is invested in certain Treasury securities, matures daily, and is ordinarily fully reinvested. During a debt limit impasse, the Secretary of the Treasury can determine that the fund not be fully reinvested — freeing up space under the debt limit.

• Halt the daily reinvestment of the Exchange Stabilization Fund (ESF). Operated by the Treasury, the ESF is used to stabilize exchange rates by buying and selling foreign currencies. The Treasury may suspend the fund’s daily reinvestment to create headroom.

• Stop issuing State and Local Government Series Treasury securities (SLGs) and savings bonds. SLGs are issued to state and local entities when they have cash proceeds from their own bond issuances that will be spent over a longer time. The Treasury can also suspend the sale of savings bonds.

Once a debt ceiling impasse is resolved, the funds listed above would be made whole so that beneficiaries are unaffected.

While extraordinary measures are only a temporary solution to a debt ceiling impasse, they can often delay the restrictions imposed by the statutory limit by up to several months. During the debt limit impasse of early [2023], for example, such measures were able to prevent the federal government from defaulting on its debt — the debt limit was reached in [January, 2023], and extraordinary measures enabled to government to continue meeting its obligations until legislation suspending the limit was passed on [June 3, 2023].

What Are the Effects of Delaying Action on the Debt Ceiling?

Debt ceiling impasses can increase federal borrowing costs, threaten the U.S. credit rating, and cause measurable damage to our economy. For example, waiting to address the debt ceiling in 2011 led to a number of such consequences:

• Increased the Treasury’s borrowing costs by $1.3 billion in fiscal year 2011

• Resulted in the downgrading of U.S. government credit rating

• Reduced household wealth and business confidence

It's so tiresome.
Why can't nobody say outright that core inert inflation will continue rising because global demographics will break through the 8 billion counter and reach – at least, what it's being hypothesized – the 10 billion mark.


***UPDATE***

Treasury says Chinese hackers remotely accessed several workstations and unclassified documents – Associated Press

Hell of a way for the Treasury to say that the deadline will expire & no compromises were reached, now that Yellen will have to enact those variety of accounting maneuvers, known as “extraordinary measures”(sic!).

[jimfields33]

3. That is a very good overview of the situation.

I read it twice because so much info. Thank you so much for providing this.