Our forefathers turned their debts into currency. That Constitutional approach could work today.
Trillion Dollar Coin design. DonkeyHotey, CC BY 2.0 https://creativecommons.org/licenses/by/2.0, via Wikimedia Commons
By Ellen Brown / Original to ScheerPost
On Friday, Jan. 13, Treasury Secretary Janet Yellen wrote to Congress that the U.S. government will hit its borrowing limit on Jan. 19, forcing the new Congress into negotiations over the debt limit much sooner than expected. She said she will use accounting maneuvers she called “extraordinary measures” to keep U.S. finances running for a few months, pushing the potential date for default to sometime in the summer. But she urged Congress to get to work on raising the debt ceiling.
Lifting it above its current $31.385 trillion limit won’t be easy with a highly divided and gridlocked Congress. As former Republican politician David Stockman crowed in a Jan. 11 article:
15 [House] votes and the slings and arrows of MSM opprobrium were well worth it. That’s because the GOP’s anti-McCarthy insurrection obtained concessions which just might slow America’s headlong rush to fiscal armageddon. And just in the nick of time!
We are referring, of course, to the Speaker elect’s promise that there will be no more debt ceiling increases without off-setting spending cuts; and that in the event of a double-cross a single Member of the House may table a motion to vacate the Speaker’s chair.
Even if Congress succeeds in raising the debt ceiling, the Federal Reserve’s aggressive interest rate hikes are likely to push interest on the federal debt to unsustainable levels. The problem was detailed by the House Republican Policy Committee like this:
As of December 8, 2022, the U.S. gross national debt stood at nearly $31.5 trillion, $8.5 trillion higher than it was just three years before and the highest level in our nation’s history. Last year [in March 2021], the Congressional Budget Office (CBO) projected the federal government would spend $282 billion servicing our debt in 2022, but that projection ballooned to nearly $400 billion as the Federal Reserve tightens monetary policy and the debt continues to grow.
… While interest rates have been low by historical standards, if interest rates rose to 5 percent, where they were as recently as 2007, net interest payments on the current debt level held by the public would be over $1 trillion, more than the federal government spends annually on everything but Social Security [emphasis added; endnotes omitted].
San Francisco Fed President Mary Daly said during a live-streamed interview with The Wall Street Journal that she expects policymakers to raise interest rates to somewhere above 5%, and JPMorgan CEO Jamie Dimon said it “may very well” raise rates to 6%.
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The global debt cycle has reached the stage where, historically, a major “monetary reset” has been required. In 1913, it was done by instituting the Federal Reserve to backstop a banking system unable to meet withdrawals in gold. In 1933, it was done by taking the dollar off the gold standard domestically; in 1969, by taking the dollar off the gold standard internationally; and in 2008-09, by bailing out the banks with quantitative easing.