Posted BY: A.F. Cronin
Promissory notes are stacked to the Treasury Department’s proverbial ceiling, $31.4 trillion dollars’ worth of them. Over $5 trillion of those dollars have been purchased and are held by the Federal Reserve Bank; meaning the federal financial system, in effect, lends money to itself.
Because of a statutorily-set debt limit, the Treasury hasn’t been able to borrow more money from itself to fund government operations since January 2023. To make matters more dire, soon the Treasury won’t be able to scrounge any more cash to pay all the bills through “extraordinary measures.” Congress and the President need to find a way to increase the debt limit or default on obligations.
Howls of impending disaster fill the air.
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Treasury Secretary Janet Yellen articulated the situation in a May 1st letter to Speaker of the House Kevin McCarthy:
“After reviewing recent federal tax receipts, our best estimate is that we will be unable to continue to satisfy all of the government’s obligations by early June… if Congress does not raise or suspend the debt limit before that time… If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests.”