Scary stuff from the US Treasury on May 22:

“With an additional week of information now available, I am writing to note that we estimate that it is highly likely that Treasury will no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1,” Yellen wrote Monday [May 22].”

Under these conditions, Kevin McCarthy would in a more rational world just buy time, by passing a bill that would suspend the debt ceiling for a couple of months. Why isn’t he doing it? To pass a suspension, would require the vote of a small group of Republicans who think all this brinkmanship can work to their advantage. They want their pound of flesh from Biden. It is a political power game. And this time, it just might go too far.

Yes. Default is a self-inflicted wound. The equivalent of crashing a plane to draw attention to flight safety.

I know the country would be just fine without a debt ceiling. Congress already has the authority to raise or lower taxes and approve spending. Yes, if Congress does not approve a budget, we go in shut down mode, where government services must be cut. This is very different. The US can not default on its debt as the world depends on the dollar.

The minting of a trillion dollar coin, issuing premium bonds and invoking the 14th amendment, have all been suggested, and described by others as gimmicks, which would result in a massive loss of confidence in the credit of the US.

I don’t know how the next 1-3 weeks will play out.

Stay tuned,

Dave