Last Thursday, Treasury Secretary Janet Yellen said that the US had hit the debt ceiling and that the Treasury would have to start taking “extraordinary measures” to keep paying the bills for as long as it can, which she predicted would be until early June.
Have you ever told your kids that you’re going to take them to the store, only to open your wallet and find it empty? The US may soon be in that situation if a political stalemate over raising the debt ceiling continues—and it might take all of us over the cliff right with it, even those who aren’t Americans.
Raising the debt ceiling has been a political tug-of-war in recent years, but things seem to be coming to a head. The Republicans in the House have already experienced turbulence with regard to the vote for speaker. It’s likely that the factions will also have difficulty coming to a unified decision on what to do about the debt ceiling, and whether to let the US default on its debts. Meanwhile, the Democrats in Congress and the White House have asserted that they are unwilling to participate in any negotiations.
Wall Street analysts have been mixed on the issue. Some of those who are nervous point to the massive damage that was caused to the UK economy by a policy proposal by the short-lived government of former Prime Minister Liz Truss. The fear is that the US toying with default could do much worse, and sink other countries’ economies along with its own.
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