The United States government has reached its statutory debt ceiling. This was reported by the Ministry of Finance on Thursday. The competent minister Janet Yellen writes in a letter to the US House of Representatives that “extraordinary measures” are being taken to prevent the debt ceiling from being breached. Experts say that if Republicans and Democrats fail to strike a deal to raise or abolish the debt ceiling, the global economy will plunge into chaos.
The US government has been struggling with budget deficits for years and therefore has to borrow money on the financial markets. However, the amount of debt is set by law. Currently, the maximum amount of debt outstanding is $31.881 trillion. Converted, that is 29,553,368,190,000 euros. As Yellen predicted last week, that ceiling was reached on Thursday.
If the ceiling is not raised, the world’s largest economy will not be able to pay off its debts. That would send a shock wave through the financial sector, causing problems in the broader economy. After all, trading US debt is the backbone of global stock markets. If the US cannot repay those debts, confidence will collapse.
Federal civil servants would also no longer receive wages and it could cause problems with federal health insurance.
In the past, the chief economist of credit rating agency Moody’s estimated that a long debt-ceiling crisis would plunge the US into recession, cost six million jobs and cripple billions in economic growth.
With the “extraordinary measures”, Finance Minister Yellen is trying to ensure that the US does not get into trouble until this summer. It does this, among other things, by postponing investments in government pension funds.
Yellen can stretch time with other technical interventions, but in her letter to American politics, she is firm: “I urge Congress to act quickly to protect faith in and respect for the United States.” It is now up to President Joe Biden as leader of the Democrats and Speaker of the House of Representatives Kevin McCarthy as leader of the Republicans to strike a deal.
Free unlimited access to Showbytes? Which can!
Log in or create an account and don’t miss a thing of the stars.
