
News Link • Government Debt & Financing
In Her Last Official Act, Yellen Warns US Will Hit Debt Ceiling One Day After Trump Inauguration
• https://www.zerohedge.com, by Tyler DurdenBack in the last week of December, when the stock market was desperately trying to reverse the slump of the Santa rally which prevented stocks from closing 2024 at an all time high, we warned that a bigger threat than a modest 1% market drawdown was looming: the countdown to the next debt ceiling crisis. We quoted Democratic operative - and the only US government official who has personally overseen total debt increase by a staggering $15 trillion under her watch at both the Fed and Treasury - Janet Yellen...
... the said the United States would hit its statutory debt ceiling around the middle of January, at which point the Treasury would resort to "extraordinary measures" to prevent the government from defaulting on its obligations.
While it may not feel like it, we are now in mid-January, and late on Friday, Janet Yellen, in what is almost certainly the last ever official announcement of her long and undistinguished political career, said that the US would hit its debt ceiling the day after President Trump is inaugurated, and that the Treasury will launch "extraordinary measures" to stave off the threat of a national default.
After a previous 20-month suspension of the debt limit expired earlier this month, Yellen wrote in a letter to bipartisan congressional leaders Friday she was advising them "of the extraordinary measures that Treasury will begin using on January 21." That will be a day after the Biden administration leaves office. "I respectfully urge Congress to act promptly to protect the full faith and credit of the United States."
The letter marked the second notification in the latest tussle over the debt limit, which kicked back in as of Jan. 2, and the last ever for Yellen before the Trump administration takes office Jan. 20. Congress had suspended the ceiling in 2023 after a close-fought battle by lawmakers to avert a default on federal obligations. The limit is currently set at about $36 trillion.
While some strategists anticipate an easier path to an agreement to suspend or lift the cap given Republicans' unified control of Congress and the White House once Trump takes office again on Jan. 20, until that action is taken the Treasury will need to deploy measures used repeatedly over the decades to avoid breaching the limit.