Janet Yellen, AGAIN Issues Dire Debt Ceiling Message

by Wall Street Rebel - Michael London | 05/15/2023 8:43 PM

The Secretary of the Treasury, Janet Yellen, repeated her warning that her department's funds may be depleted by June 1st, unless Congress raises or suspends the federal debt limit.

On Monday, Treasury Secretary Janet L. Yellen restated that the United States may exhaust its funds to fulfill its financial obligations by June 1 unless Congress decides to increase or suspend the debt limit. This development has intensified the urgency for President Biden and congressional leaders to come to a resolution to prevent a potential default.

The Treasury Department issued a prior cautionary statement regarding the X-date, which refers to the hypothetical date the federal government may potentially default on its debt. This date was projected to occur as early as June 1. The previous forecast precedes the anticipated meeting between Mr. Biden and Speaker Kevin McCarthy, alongside other prominent legislators, at the White House, following a series of negotiations conducted by their respective staff over the weekend.

Ms. Yellen warned legislators about the potential depletion of federal funds, noting that the precise timeline for this occurrence may extend beyond the projected estimates by several days or weeks. The speaker implored the legislative body to take action in order to avert a potential default expeditiously.

Ms. Yellen stated that previous instances of impasses regarding the debt limit have demonstrated that delaying the suspension or increase of the debt limit until the final moments can result in significant damage to business and consumer confidence, an increase in short-term borrowing expenses for taxpayers, and an adverse effect on the credit rating of the United States.

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To continue paying the nation's debts after the debt limit of $31.4 trillion was formally hit on January 19, the Treasury Department has been using a series of accounting procedures known as extraordinary measures. This has allowed them to avoid going over the debt ceiling.

Ms. Yellen did not detail any more steps she intends to take to save money in her presentation. According to the projections made by specialists in the field of budgeting, if the government successfully finds adequate resources to pay its debts up to the middle of June, then an inflow of quarterly tax collections might allow further financial flexibility until later in the summer.

The letter sent by Ms. Yellen is the most recent cautionary note on the vulnerable financial state of the country. The Congressional Budget Office said on Friday that there was a "significant risk" that the federal government may run out of cash sometime during the first two weeks of June. The statement was made in reference to the possibility that the federal government could run out of cash somewhere during the first two weeks of June. If this were to occur, the United States would be unable to pay all of its payments on time within a couple of weeks.

According to projections made by a nonpartisan budget agency, a default would result in "distress in credit markets, disruptions in economic activity, and rapid increases in borrowing rates for the Treasury."

It is now unknown whether or not the two parties will be able to achieve a compromise in time to avert a default on their obligations. On Sunday, Mr. Biden voiced his hope that an agreement could be struck, but on Monday, Mr. McCarthy said that the two sides were still very far apart in their positions.

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The available time is becoming limited. It is anticipated that Mr. Biden will embark on a trip to Japan on Wednesday in order to participate in the Group of 7 summit of leaders. Additionally, it is expected that House legislators will adjourn prior to the Memorial Day weekend.