The United States is facing a potentially catastrophic financial crisis unless Congress acts soon to increase or suspend the debt limit, according to a letter from Treasury Secretary Janet Yellen. Yellen warns that failure to act could result in the government being unable to meet its obligations by June 1, 2023, causing severe harm to American families and the country’s global leadership position.
While it is impossible to predict the exact date when the Treasury will be unable to pay the government’s bills, Yellen emphasizes that Congress must act quickly to prevent the situation from worsening. She notes that past experience has shown that waiting until the last minute to increase or suspend the debt limit can harm business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States.
As a result, the Treasury has already suspended the issuance of State and Local Government Series (SLGS) Treasury securities, depriving state and local governments of a valuable tool for managing their finances. This move underscores the urgent need for Congress to take action.
But is this the start of another financial crisis? The Treasury has already reached the current debt limit of $31.4 trillion, leaving no room to borrow under its standard operating procedures, other than to replace maturing debt. It is clear that the government lacks the funds to cover even one year’s worth of expenses and will never be able to repay this debt.
The government’s favored strategy is to allow inflation to rise, making servicing existing debts easier. However, this is only a short-term solution that postpones the inevitable. There are only two options: increase the debt ceiling and delay the collapse for a few more years, or face a financial collapse like that seen in Venezuela.
It is highly likely that Congress will choose option one, but the system will eventually collapse. FIAT currencies always collapse due to hyperinflation, political instability, economic mismanagement, and other factors. It’s only a matter of time, and predicting the exact timing of the collapse is challenging.
It is clear that a reset is necessary, but the question is when it will happen. The government is set to run out of money in the next six months, and the markets will react accordingly. In 2011, a similar situation caused the S&P500 to fall by 18%, and it is another reason why analysts are forecasting a decline to 3,390 on the SPX. This level is where the “matrix” began with all the money printing and giveaways.
While it is unlikely that politicians will directly cause the financial system to collapse within the next 5-10 years, a loss of confidence in the system is growing. People are beginning to realize the fraudulent nature of the system, and this will eventually lead to a collapse. The only question is when.
In conclusion, the United States is facing a financial crisis unless Congress acts quickly to increase or suspend the debt limit. While it is possible to delay the inevitable collapse for a few more years, the system will eventually collapse. The only question is when it will happen. A reset is necessary, and the longer we delay, the worse the consequences will be.
