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The US Federal government reached its limit on borrowing on January 21 and is currently taking "extraordinary measures" to avoid a sovereign default. There is c

The US Federal government reached its limit on borrowing on January 21 and is currently taking "extraordinary measures" to avoid a sovereign default. There is currently no agreement to raise the debt limit in Congress. While there is some variability in spending (e.g. natural disasters may cause the federal government to spend more money for FEMA aid), the sovereign default is expected to occur in about a month. https://www.voanews.com/a/us-treasury-to-launch-measures-tuesday-to-avoid-debt-limit-breach/7941461.html https://www.voanews.com/a/us-treasury-to-launch-measures-tue...

jddj 2y ago
> Depending on who is doing the research, it is said that the US has raised its debt ceiling (in some form or other) at least 90 times in the 20th century.[1] [1] https://en.m.wikipedia.org/wiki/History_of_the_United_States_debt_ceiling https://en.m.wikipedia.org/wiki/History_of_the_United_States...
- bwestergard 2y ago
  While I would never be so bold as to venture a prediction, the risk of a partial default seems elevated. No previous administration has voiced the opinion that partially defaulting by halting payments from the Treasury would be a legitimate exercise of executive authority. "Musk said in social media posts over the weekend that his “DOGE team” of enforcers is shutting down some payments, claiming that “corruption and waste is being rooted out in real-time.” If the Musk team veered into legally legitimate transfers, that could spark debate over whether the federal government is following through on its obligations. Former Treasury Secretary Janet Yellen said repeatedly — during debt-limit standoffs — that even prioritizing some payments ahead of others amounted to “default by another name.” Trump’s first Treasury chief, Steven Mnuchin, said in 2017 that “the government should honor all of its obligations." https://finance.yahoo.com/news/musk-moves-treasury-risk-debate-183530758.html https://finance.yahoo.com/news/musk-moves-treasury-risk-deba...
  - deleted 2y ago
    [deleted]
  - panarky 2y ago
    Before it happens it's conspiracy thinking to go around connecting random dots. After it happens, everyone will say it was obvious all along, if only you could have connected the dots. Dots such as famously bragging about defaulting on personal and business debts, big promises about radical reductions in debt levels with zero public plan for how it's supposed to happen, eagerness to renege on long standing treaty commitments, withdrawal from international organizations, threats of economic warfare against allies and adversaries alike, immediate seizure of the Treasury systems that execute payments for bond interest and principal, a stated desire to dramatically devalue the dollar, etc. Usually gold just sits in underground vaults and changes in ownership are recorded in a ledger. When massive quantities of physical gold are put on airplanes, something unusual is happening.
    - MichaelZuo 2y ago
      This seems like a tautology. By definition people with low credibility have to fight an uphill battle to get their claims accepted.
    - DANmode 2y ago
      s/conspiracy/conspiracy theory
  - guelo 2y ago
    One theory for Elon getting into Treasury's computers is that when the gov defaults he wants to prioritize paying bondholders over benefits claimants to keep the market calm. Treasury has refused to do prioritization in previous debt limit crises.
    - motohagiography 2y ago
      there was a related comment by the president about the legitimacy of some of the bonds the treasury was paying interest on[1], which might add to this uncertainty. it could be related to his common tactic of creating strategic uncertainty, but this one was oddly specific. most heads of state refrain from commenting on default risk as the 'bond vigilantes' who lend their treasury money by buying their bonds are essential to their ability to fund government and govern. the risk of course is that there are trillions in derivatives stacked on top of any so-called "illigitimate" debt, which creates a kind of mexican stand-off where defaulting on those bonds causes systemic liquidity problems elsewhere in the system that will require policy intervention to recover from it, hence it is never a priority to touch it. That's a sci-fi interpretation, and any actual practitioner in finance (I am not one) might call that irresponsible speculation so ymmv. but still, maybe it's a political play. a certain set of asset managers is orchestrating political problems around the world and the only way to dislodge them is to do something unthinkable. Even if he doesn't, how big are you willing to bet he won't? That hesitation is the essence of this president's strategy. Very interesting times. [1] https://www.reuters.com/markets/rates-bonds/bond-traders-waver-trump-questions-us-government-debt-figures-2025-02-10/ https://www.reuters.com/markets/rates-bonds/bond-traders-wav...
- deleted 2y ago
  [deleted]
arduanika 2y ago
Ah, the debt ceiling news cycle. Is this your first time?
- mattnewton 2y ago
  I know how many times it’s been cried before, but I am worried this time there might actually be a wolf.
  - wakawaka28 2y ago
    Whatever that wolf might be, it isn't going to be that the government can't produce more dollars to spend. It always authorizes itself to spend money and it always produces enough of that money to spend.
    - seanw444 2y ago
      Until it can't anymore. It will eventually fall apart. It is inevitable.
      - schmidtleonard 2y ago
        Governments going into too much debt is a very old problem that has happened hundreds of times before, even in the USA, so we know with high likelihood how it ends: inflation and soft default, not hard default. The timeline is the major unknown. https://www.imf.org/external/pubs/ft/wp/2015/wp1507.pdf https://www.imf.org/external/pubs/ft/wp/2015/wp1507.pdf
        wakawaka28 2y ago
        Inflation is not exactly preferable to hard defaults, although it really depends on who is being defaulted on. Defaulting on pensioners would be pretty awful. Defaulting on foreign-owned bonds would be less awful.
- marcosdumay 2y ago
analog31 2y ago
The same party controls both houses of Congress, the executive branch, and the Supreme Court. Surely they'll work this out.
- deleted 2y ago
  [deleted]
- dkjaudyeqooe 2y ago
  Have you per chance looked at the people that make up this party?
  - zdw 2y ago
    The Republicans, for all their whinging over the debt when they're not in power and using it to give the Democrats temporary black eyes, are highly unlikely to do anything that directly endangers big business profits or the stock market going up. Defaulting on the debt has no upside for them now, so probably won't happen.
    - dkjaudyeqooe 2y ago
      Seriously, have a look at some of the people involved. They are waaaay out there. The GOP don't have a majority that support either the budget or extending the debt ceiling. Dems should let them stew and make various demands in exchange for their vote, as the GOP has done to them.
      - analog31 2y ago
        I think the D's are justified in saying that there's too much uncertainty right now to allow funding to be passed through the continuing resolution process. The R's remain welcome to articulate their plans in the form of a budget, that is debated via the regular appropriations process.
        JumpCrisscross 2y ago
asdf6969 2y ago
Nothing ever happens
- toss1 2y ago
  YET. Nothing has happened YET. It has not yet happened because of the presence of at least a minimum of responsible players who both understand the consequences and care about the consequences (at least more than their particular political goals). But there is no structure that prevents it from happening, no part of the machine that prevents a mistake. There are also forces pushing it to happen. The past performance of your advice is no guarantee of future performance, and it is particularly bad today. I sincerely hope you turn out to be right, but if so, it will only be by chance.
  - asdf6969 2y ago
    It’s not going to happen. Nothing ever does
Guthur 2y ago
Considering that at any moment the US can conjure into existence as many dollars as it needs how can it possibly default?
- lovich 2y ago
  By actively choosing to? The current administration appears to view funds as being permanently capable of getting clawed back, based on their current whims as to whether the payments are "fraudulent" or not. When they talked about upending the current order, the banking system and debt in general being sacrosanct are pretty foundational to said order
  - Guthur 2y ago
    Government debt that is denominated in a currency that the government can create at any time is hardly the same as the debt you or I have. Governments do not actually borrow from anyone if they can create their own money. They provide a facility for the rich to park some of their immense wealth but that is not where the money comes from, those individuals accumulate they do not create money.
    - lovich 2y ago
      You are ignoring the part where I said they would actively chose to not pay the debt. I understand how nation states who print their own currency have a different set of rules than any agent working with currency that they do not control the monetary supply of. None of that changes the fact that they can _choose_ to default
JumpCrisscross 2y ago
> US Federal government reached its limit on borrowing on January 21 and is currently taking "extraordinary measures" to avoid a sovereign default Based on the current MO at the Treasury, it would seem that--possibly to the greatest degree in generations--whether Treasuries keep paying is almost entirely unlinked from what the Congress does.
suraci 2y ago
No, the sovereign default will never happen, or, it's always avoidable However, unrestricted fiscal deficits and debt could lead to a reversal of the low positions of the US dollar and gold, shifting from "the US dollar pricing gold" to "gold pricing the US dollar."

jddj 2y ago

> Depending on who is doing the research, it is said that the US has raised its debt ceiling (in some form or other) at least 90 times in the 20th century.[1] [1] https://en.m.wikipedia.org/wiki/History_of_the_United_States_debt_ceiling https://en.m.wikipedia.org/wiki/History_of_the_United_States...

bwestergard 2y ago
While I would never be so bold as to venture a prediction, the risk of a partial default seems elevated. No previous administration has voiced the opinion that partially defaulting by halting payments from the Treasury would be a legitimate exercise of executive authority. "Musk said in social media posts over the weekend that his “DOGE team” of enforcers is shutting down some payments, claiming that “corruption and waste is being rooted out in real-time.” If the Musk team veered into legally legitimate transfers, that could spark debate over whether the federal government is following through on its obligations. Former Treasury Secretary Janet Yellen said repeatedly — during debt-limit standoffs — that even prioritizing some payments ahead of others amounted to “default by another name.” Trump’s first Treasury chief, Steven Mnuchin, said in 2017 that “the government should honor all of its obligations." https://finance.yahoo.com/news/musk-moves-treasury-risk-debate-183530758.html https://finance.yahoo.com/news/musk-moves-treasury-risk-deba...
- deleted 2y ago
  [deleted]
- panarky 2y ago
  Before it happens it's conspiracy thinking to go around connecting random dots. After it happens, everyone will say it was obvious all along, if only you could have connected the dots. Dots such as famously bragging about defaulting on personal and business debts, big promises about radical reductions in debt levels with zero public plan for how it's supposed to happen, eagerness to renege on long standing treaty commitments, withdrawal from international organizations, threats of economic warfare against allies and adversaries alike, immediate seizure of the Treasury systems that execute payments for bond interest and principal, a stated desire to dramatically devalue the dollar, etc. Usually gold just sits in underground vaults and changes in ownership are recorded in a ledger. When massive quantities of physical gold are put on airplanes, something unusual is happening.
  - MichaelZuo 2y ago
    This seems like a tautology. By definition people with low credibility have to fight an uphill battle to get their claims accepted.
  - DANmode 2y ago
    s/conspiracy/conspiracy theory
- guelo 2y ago
  One theory for Elon getting into Treasury's computers is that when the gov defaults he wants to prioritize paying bondholders over benefits claimants to keep the market calm. Treasury has refused to do prioritization in previous debt limit crises.
  - motohagiography 2y ago
    there was a related comment by the president about the legitimacy of some of the bonds the treasury was paying interest on[1], which might add to this uncertainty. it could be related to his common tactic of creating strategic uncertainty, but this one was oddly specific. most heads of state refrain from commenting on default risk as the 'bond vigilantes' who lend their treasury money by buying their bonds are essential to their ability to fund government and govern. the risk of course is that there are trillions in derivatives stacked on top of any so-called "illigitimate" debt, which creates a kind of mexican stand-off where defaulting on those bonds causes systemic liquidity problems elsewhere in the system that will require policy intervention to recover from it, hence it is never a priority to touch it. That's a sci-fi interpretation, and any actual practitioner in finance (I am not one) might call that irresponsible speculation so ymmv. but still, maybe it's a political play. a certain set of asset managers is orchestrating political problems around the world and the only way to dislodge them is to do something unthinkable. Even if he doesn't, how big are you willing to bet he won't? That hesitation is the essence of this president's strategy. Very interesting times. [1] https://www.reuters.com/markets/rates-bonds/bond-traders-waver-trump-questions-us-government-debt-figures-2025-02-10/ https://www.reuters.com/markets/rates-bonds/bond-traders-wav...
deleted 2y ago
[deleted]

arduanika 2y ago

Ah, the debt ceiling news cycle. Is this your first time?

mattnewton 2y ago
I know how many times it’s been cried before, but I am worried this time there might actually be a wolf.
- wakawaka28 2y ago
  Whatever that wolf might be, it isn't going to be that the government can't produce more dollars to spend. It always authorizes itself to spend money and it always produces enough of that money to spend.
  - seanw444 2y ago
    Until it can't anymore. It will eventually fall apart. It is inevitable.
    - schmidtleonard 2y ago
      Governments going into too much debt is a very old problem that has happened hundreds of times before, even in the USA, so we know with high likelihood how it ends: inflation and soft default, not hard default. The timeline is the major unknown. https://www.imf.org/external/pubs/ft/wp/2015/wp1507.pdf https://www.imf.org/external/pubs/ft/wp/2015/wp1507.pdf
      - wakawaka28 2y ago
        Inflation is not exactly preferable to hard defaults, although it really depends on who is being defaulted on. Defaulting on pensioners would be pretty awful. Defaulting on foreign-owned bonds would be less awful.
marcosdumay 2y ago

analog31 2y ago

The same party controls both houses of Congress, the executive branch, and the Supreme Court. Surely they'll work this out.

deleted 2y ago
[deleted]
dkjaudyeqooe 2y ago
Have you per chance looked at the people that make up this party?
- zdw 2y ago
  The Republicans, for all their whinging over the debt when they're not in power and using it to give the Democrats temporary black eyes, are highly unlikely to do anything that directly endangers big business profits or the stock market going up. Defaulting on the debt has no upside for them now, so probably won't happen.
  - dkjaudyeqooe 2y ago
    Seriously, have a look at some of the people involved. They are waaaay out there. The GOP don't have a majority that support either the budget or extending the debt ceiling. Dems should let them stew and make various demands in exchange for their vote, as the GOP has done to them.
    - analog31 2y ago
      I think the D's are justified in saying that there's too much uncertainty right now to allow funding to be passed through the continuing resolution process. The R's remain welcome to articulate their plans in the form of a budget, that is debated via the regular appropriations process.
      - JumpCrisscross 2y ago

asdf6969 2y ago

Nothing ever happens

toss1 2y ago
YET. Nothing has happened YET. It has not yet happened because of the presence of at least a minimum of responsible players who both understand the consequences and care about the consequences (at least more than their particular political goals). But there is no structure that prevents it from happening, no part of the machine that prevents a mistake. There are also forces pushing it to happen. The past performance of your advice is no guarantee of future performance, and it is particularly bad today. I sincerely hope you turn out to be right, but if so, it will only be by chance.
- asdf6969 2y ago
  It’s not going to happen. Nothing ever does

Guthur 2y ago

Considering that at any moment the US can conjure into existence as many dollars as it needs how can it possibly default?

lovich 2y ago
By actively choosing to? The current administration appears to view funds as being permanently capable of getting clawed back, based on their current whims as to whether the payments are "fraudulent" or not. When they talked about upending the current order, the banking system and debt in general being sacrosanct are pretty foundational to said order
- Guthur 2y ago
  Government debt that is denominated in a currency that the government can create at any time is hardly the same as the debt you or I have. Governments do not actually borrow from anyone if they can create their own money. They provide a facility for the rich to park some of their immense wealth but that is not where the money comes from, those individuals accumulate they do not create money.
  - lovich 2y ago
    You are ignoring the part where I said they would actively chose to not pay the debt. I understand how nation states who print their own currency have a different set of rules than any agent working with currency that they do not control the monetary supply of. None of that changes the fact that they can _choose_ to default

JumpCrisscross 2y ago

> US Federal government reached its limit on borrowing on January 21 and is currently taking "extraordinary measures" to avoid a sovereign default Based on the current MO at the Treasury, it would seem that--possibly to the greatest degree in generations--whether Treasuries keep paying is almost entirely unlinked from what the Congress does.

suraci 2y ago

No, the sovereign default will never happen, or, it's always avoidable However, unrestricted fiscal deficits and debt could lead to a reversal of the low positions of the US dollar and gold, shifting from "the US dollar pricing gold" to "gold pricing the US dollar."