If the debt ceiling isn’t raised, USA defaults in October

A debt is something owed. When a company doesn’t have enough resources to return it, it defaults.

One of China’s biggest companies – a real estate developer Evergrande – is about to give us yet another demonstration of this simple economic truth.

However, what if the defaulting company can influence the money-printing institution to create some new money and buy its newly created debts, which will finance the repayment of its previous debts? This is a Ponzi with costs passed on everyone else who already owns that money.

And yet that’s exactly what the US Treasury Secretary Janet Yellen is asking the Congress to do, at the risk of an imminent default that will plunge the country into a deep recession.

This isn’t new: the US debt ceiling was increased several times before and even completely suspended for 2 years in 2019. This suspension is now expired though, and the Congress much chose whether to raise the ceiling again, allowing the government to issue more debt.

What happens if they don’t? The US will default at latest in October, which will of course have tragic implications for the Americans and the world economy that still relies on the dollar.

What happens if they do?  The debt will continue to rise, the Fed’s balance sheet – to swell… However there’s always a limit at which an elastic band cannot stretch anymore, and goes BOOM ?

You know what to do ?