Things

 

to consider...

The doomsday clock on the debt limit is ticking The debt limit "X date" is looming nearer due to student loan and Fed moves.

"Congress will have a shorter-than-expected window to negotiate a debt limit increase this year thanks to policy decisions by both the Biden administration and the Federal Reserve."

"The impact of two costly moves on the government’s finances — President Joe Biden’s decision to extend a federal student loan payment freeze plus the Fed’s rapid interest rate hikes — are under scrutiny as analysts gauge precisely when the U.S. will run out of money to pay its bills."

"Identifying that deadline, known as the “X date,” is crucial as House Republicans and the White House enter a stalemate over how to raise the government’s borrowing authority. The U.S. hit its $31.4 trillion debt limit Thursday, forcing the Treasury Department to use “extraordinary measures” to avoid a potentially catastrophic default on the nation’s financial obligations. Treasury projects that those measures and its remaining available cash will buy time through at least early June."

"But the deadline with the most political significance is the X date."

"The Bipartisan Policy Center think tank, a go-to resource for identifying that deadline, expects it will hit sooner than it initially thought thanks to the student loan freeze, which halted incoming government payments from millions of borrowers, and the Fed’s inflation-fighting rate increases, which raise Treasury’s cost of borrowing to fund federal operations.'

“On both of these counts, you’re talking about tens of billions of dollars,” said the center’s director of economic policy Shai Akabas, who believes that’s enough to accelerate the X date by several weeks."

'The group now expects the deadline to be around the middle of the year."

(We're gonna screw around and default and the FEDs not even gonna have to keep raising rates at this pace.)

"A shorter time period would be just one of the pressure points that’s threatening to make the upcoming debt limit standoff one of the most contentious in history."

"A debt limit breach carries enormous unknown stakes:

because of its potential impact on financial markets, 

where a 

government default on its bonds could cause chaos, 

and on the broader economy, 

if the U.S. can’t pay for things like Social Security benefits and military salaries.

(and the broader WORLD economy)

“The period of time that extraordinary measures may last is subject to considerable uncertainty, including the challenges of forecasting the payments and receipts of the U.S. government months into the future,” Yellen told lawmakers in a letter Thursday. “I respectfully urge Congress to act promptly to protect the full faith and credit of the United States.”"

"The continuing series of interest rate increases the Fed has undertaken to fight inflation since last March is another pressure point.

The rate hikes force the government to pay more to service its debt, meaning more money is going out the door. The Fed last year raised its main borrowing rate from near zero to above 4 percent."

"The government’s increased interest costs haven’t jumped to the same extent, said Wendy Edelberg, director of The Hamilton Project at the Brookings Institution and a former chief economist at the Congressional Budget Office.

“There’s not going to be a ton of debt that’s rolled over to these higher rates,” she said, estimating that the average interest rate paid by the U.S. is still 2 percent, not significantly higher than what CBO projected last May.

Still, Akabas said the blow to the federal budget could potentially be in the tens of billions of dollars."

(I've read about this before:

"There’s not going to be a ton of debt that’s rolled over to these higher rates."

Wolfstreet I think it was...

If that's the case?

Why is everybody at the Fed wanting to stop at 5% and see what happens? When interest rates at that level are still below the rate of inflation and that has never stopped it in the past?

Just wondering...

Evans: Rates moving too high could have 'nonlinear' impact on US economy

Fed's rate debate shifts to how, and when, to slow down

"It also has been blunt: In comments this week in Virginia, Chicago Fed President Charles Evans warned of outsized "nonlinear" risks to the economy if the federal funds rate is lifted much beyond the 4.6% level officials projected in September that they would reach next year."

"It really does begin to weigh on the economy," Evans said."

I wouldnt take it he just meant:

"impact on the economy as businesses become more pessimistic..."

He knows wats up...)

"Inflation could also have an impact, in part because of Treasury Inflation-Protected Securities, a type of government bond that has attracted new interest from investors in recent months because its value increases as prices rise. Though price spikes have begun to ease over the last few months, if that trend reverses it could amount to tens of billions of dollars in more debt on the books."

You play with explosives' long and often enough?

Sonner or later they blow up.

Not if but when.

Count on it.

This is somebody who just a short time ago would not have been believing himself what he is sitting here typing...