US Treasury Secretary Janet Yellen announced that the country could run out of cash reserves until October. This would be the first time in history that the US has exhausted its financial reserves. To prevent bankruptcy, Yellen asked Congress to authorize the issuance of new bonds on the country’s foreign debt.
In a letter addressed, last Wednesday (8), to the Democratic and Republican parties in the House of Representatives and the Senate, the secretary of the Treasury assures “once all extraordinary measures and cash available are exhausted , the United States will not be able to fulfill its obligations for the first time in our history.”
The United States is facing one of the biggest crises in decades. For the first time in history, its external debt surpassed the country’s gross domestic product by US$ 3.3 trillion (which is about R$ 15 trillion) at the end of 2020. The debt is expected by the end of 2021 amount to $22.4 trillion (BRL 114 trillion). Now the Treasury Department is asking Parliament to be able to further indebt the country in order to fund the state.
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The Treasury secretariat claims that a month ago they stopped paying the social security installments of public servants to reduce spending, as well as increased interest rates for short-term loans. Now, the Sept. 15 due date for various taxes puts the Federal Reserve at risk, as there will be little money in circulation.
In 2019, during Donald Trump’s tenure, a US debt ceiling of $22 trillion (about R$114 trillion) for two years was approved. The measure, however, was automatically renewed last August 1st. Yellen says that if the debt ceiling is not revised, it could cause “irreparable damage” to the US economy and world financial markets.
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So far, Republican caucus leaders have refused to raise the state’s debt limit, while Democrats plan to link the debt increase to the approval of new financing bills. An impasse on Capitol Hill could lead to a new closure of US public institutions, as happened in 2019. During Trump’s presidency, several institutions were closed for 35 days, the longest suspension in history, leaving 800,000 workers without pay.
In 52 years, the US Congress has changed the state’s borrowing limit on 78 occasions. Since 1944, with the Bretton-Woods Agreement, the world has adopted the US dollar as the reference currency for foreign trade.
Edition: Arturo Hartmann