After arduous negotiations between the White House and Congress, the hard-won achievements may very well be undermined by the Federal Reserve.
The inability of various parties in the United States to take unified action to save the economy may only lead the country deeper into the abyss of debt.
Now that the new debt ceiling bill has been approved, as of this morning, the U.S. Treasury has only $228.9 billion left in its coffers.
Will it be in time to issue new debt immediately?
Even if new debt can be issued right away, will the unexpected actions of the Federal Reserve cause more twists and turns in the situation?
01. The United States is running out of money
The United States began to show signs of potential debt default at the beginning of this year, with expectations that the country might default in June.
According to the financial data from the U.S. Treasury, the cash account balance of the U.S. Treasury is dwindling.
In May, over the span of 25 days, more than a hundred billion dollars were spent, and then at the end of the month, the balance increased to over $40 billion, only to quickly fall back down, leaving only $22.892 billion remaining, which is the lowest level since 2015.
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It is evident that the U.S. Treasury's expenditures in May were considerable, and the cash crisis at the U.S. Treasury is extremely severe.According to the global billionaire rankings, there are now many billionaires whose net worth has exceeded the cash balance of the U.S. Treasury.
The net worth of the world's richest person is already seven times that of the United States' cash savings.
02, Too Good at Spending
When the U.S. debt reaches its limit, the U.S. Treasury actually still has several tools at hand to obtain temporary cash limits.
One of these tools is called extraordinary measures, with a total limit of $337 billion, but now, there is only slightly more than $20 billion left. From this data, we can also see how much the U.S. Treasury spends.
It is precisely because of long-term expenditures exceeding income that the U.S. debt hole has become larger and larger.
Now, after a hard negotiation between the White House and congressional representatives, the two sides have reached the latest agreement on the U.S. debt limit, and it has been approved by the U.S. House of Representatives and the Senate in the past two days.
This means that until the beginning of 2025, the U.S. Treasury's debt issuance will temporarily not be subject to the debt limit.
This further indicates that the U.S. Treasury, which is very short of money, may fall into a frantic pace of debt issuance in the future.
But now the biggest trouble is that can the debt issuance go as smoothly as before?03, Who Pays the Bill?
Over the years, the United States has not only raised the debt ceiling more than once. However, each time the debt ceiling has been raised, it has been followed by reckless spending, without rational financial management, which has also led to the debt reaching the limit once again.
The two parties in the United States are also constantly competing over the issue of the debt ceiling. But competition after competition has consumed the credibility of the U.S. government and the status of the U.S. dollar at the same time.
At a time when the U.S. debt has reached its limit, the Treasury's cash is running dry, and the status of the U.S. dollar is in danger, the global de-dollarization has increased the pressure on the United States.
Over the years, with the development of American hegemonism, the nature of the U.S. dollar has long been changed. Now, countries that are aware of the risks have started to accelerate the sale of U.S. debt.
Everyone is selling, and it will be even more difficult for the United States to issue new debt. If the issuance of national debt is not purchased, the crisis of U.S. debt may be further triggered.
The day before yesterday, the U.S. Treasury has announced that the 3-month and 6-month Treasury bills that were originally to be issued next week have to be postponed for various reasons.
This is also understood by the outside world as the most explicit signal that the difficulty of future U.S. debt issuance is increasing.
04, The Federal Reserve is causing trouble
In addition, the interests of various parties within the United States have not yet been truly coordinated.At a time when the U.S. Treasury is most in need of issuing new debt, the Federal Reserve may once again decide to raise interest rates.
Previous market data models showed that the possibility of a rate hike in June had already reached 66%.
After the latest employment data was released, it showed an unusually tight labor market, which has made the possibility of a rate hike by the Federal Reserve in July very high.
Previously, Federal Reserve's Bullard predicted that at least two more rate hikes would be needed in the future, and now it seems that this prediction is about to become a reality.
The higher the federal interest rate, the interest rate at which U.S. debt is issued can only be correspondingly increased, which means that the current U.S. needs to pay $850 billion in national debt interest every year, and this will further increase in the future.