U.S. Treasury Secretary Steven Mnuchin warns the United States might max out its credit limit in September. If that happens, the federal government will not be able to pay some of its bills. In a letter to House Speaker Nancy Pelosi (D-Calif.), Mnuchin requested Congress increase the debt ceiling before August recess. The Treasury Secretary warned a failure to do so could leave the federal government broke. In the letter, he wrote :
“Based on updated projections, there is a scenario in which we run out of cash in early September, before Congress reconvenes. As such, I request that Congress increase the debt ceiling before Congress leaves for summer recess.”
The debt ceiling is the limit Congress sets on how much money the U.S. Treasury can borrow. The current debt ceiling is a jaw-dropping $20.46 trillion – as if the federal government doesn’t get enough money already from taxes. And by borrowing so much, the government is committing taxpayers to pay the borrowed money back with interest.
In the meantime, the Federal Reserve buys much of the Treasury’s debt with money it creates out of thin air and lends to the government. As of Q1 2019, the Federal Reserve held $2.5 trillion of the U.S. national debt. This causes inflation and reduces consumer purchasing power. So Americans get taxed again when they pay higher prices at the gas pump and checkout lines.
The Hill reports Mnuchin’s letter is a first. This is the first time the Treasury Secretary has formally asked Congress to pass a debt ceiling increase before closing out its session for August recess.
That doesn’t give Congress much time. The House adjourns on July 26, and the Senate leaves on August 2. The Treasury exceeded the debt ceiling earlier this year. As a result, Mnuchin says the Treasury is engaged in extraordinary measures to contain costs.
The idea of Mnuchin not being able to keep up with the bills he’s responsible for is terrifically ironic. During the financial crisis, Steven Mnuchin was an investment banker who ran OneWest bank. The Yale graduate bought OneWest after a 17-year stint at Goldman Sachs from 1985 – 2002.
His company engaged in subprime lending. When the economy collapsed in 2007, his policies were so ruthless, he was nicknamed “the foreclosure king.”
There is a mountain of evidence that he lied to the Senate Finance Committee in sworn affidavits about illegally “robo-signing” foreclosures in bulk without properly reviewing them.
In America that gets you appointed to head the U.S. Treasury. So much for draining the swamp. Mnuchin is the worst excesses of Bush and Obama-era Wall Street avarice personified.
This is why the U.S. needs a gold standard, or some basket of hard commodities to back up each dollar. Easy monetary policy permits endless fiscal irresponsibility in Washington.
The Treasury can just keep spending money it doesn’t have. When it maxes out the national credit card, Congress just raises the debt ceiling. Then the Fed steals it from Americans through inflation to create more money to lend to unscrupulous politicians who owe a lot of favors.
This is why bitcoin is priced on the assumption of mass adoption. Americans finally have a way to tame reckless spending by politicians who endlessly rail against the national debt on the campaign trail but continue piling onto it in session. All those computer processors whirring away in 10,000 bitcoin nodes across the planet to keep bitcoin secure and deflationary are robo-signing the foreclosure on a bankrupt Washington.