Janet Yellen in Online News & World News

US May Need ‘Extraordinary’ Steps to Avoid Default

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The United States may need to take “extraordinary measures” to prevent a default on its debt as early as next week, when it is projected to hit the borrowing limit currently set by Congress, Treasury Secretary Janet Yellen warned Friday. online news

“Failure to meet the government’s obligations would cause irreparable harm to the US economy, the livelihoods of all Americans, and global financial stability,” Yellen warned in a letter to Congressional leadership.

The United States is projected to reach its debt limit next Thursday, she wrote.

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“Once the limit is reached, Treasury will need to start taking certain extraordinary measures to prevent the United States from defaulting on its obligations,” she wrote.

But any such measures would only help for a limited time, likely no longer than six months, Yellen warned.

“It is therefore critical that Congress act in a timely manner to increase or suspend the debt limit,” she urged.

Lawmakers have found themselves gridlocked on the issue, with some Republican policymakers pushing for the debt limit to be used as leverage in hopes of gaining spending cuts that Democrats are against.

Treasury is unable to estimate precisely how long the extraordinary measures will allow it to continue paying the government’s obligations, Yellen said.

But she cautioned that cash and the measures could be exhausted after early June.


© Agence France-Presse. All rights are reserved.

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Notes from APS Radio News

From the early part of March 2020 to April 15, 2022, the US Federal Reserve had been increasing its holdings by nearly $5 trillion dollars.

It did this each month of that period by buying billions of dollars of corporation and government bonds, in effect, infusing massive amounts of money into the economy.

And, as the FRED graph shows, it did so at rapid rate or at a high rate of velocity.

Economists say that when massive amoutns of fiat money are infused into the economy at high rates of velocity, the likelihood of noticeably higher rates of inflation is made greater.

A number of other central banks followed a similar policy.

For example, between late February 2020, even days before the media started fixating on the virus thingy, and March of 2022, the European Central Bank embarked on its own version of monetary expansion.

During that period, the ECB increased its holdings by over 5 trillion euros.

The Bank of Japan also increased its holdings.

Between February of 2020 and May 2022, it had increased its holding by a few hundred trillion Yen.

For a number of years, including the Bank of Japan, major central banks have kept their interest rates low.

For its part, the Bank of Japan kept its interest rates at negative rates, meaning that depositors had to pay banks to hold their money.

During and before the pandemic, major corporations had increased the number of mergers and acquisitions, as those entities were able to make their purchases using inexpensive money and higher stock valuations.

The other part of the equation was that of supply.

As a result of lockdowns, many small and medium-sized businesses were closed.

Shipping ports had lost workers, and truck drivers going to those ports had to wait in long lines, as a result.

In effect, well before Russia’s invasion of Ukraine, shortages of various goods and services developed.

The invasion and sanctions imposed have aggravated shortages of commodities like petroleum and grain.

And there have been instances of price gouging.

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