The debt ceiling is in the news again And like all things in our mainstream Media there's a spin depending on where You get your information now this alone Can make it all the more confusing as to What exactly is going on in this video I'm going to explain the five major Things that will happen is this fight Intensifies and we Edge closer to the Government not being able to pay its Bills spoiler alert if no resolution is Found before the closely approaching Deadline arrives on what Janet Yellen Advises will be on June 1st of this year It could Propel us as a nation headlong And I don't say this lightly into a Depression or give a shot in the arm to A brics based currency that could have Thrown the dollar as a reserve currency So before we jump into the specifics of What could happen let me explain this Quickly and then unbiasedly as I can a Little bit about what the debt ceiling Is what it is not and why it should Matter to you What is a debt ceiling almost every year The government spends more than it Collects in taxes and that's the deficit Now to make up the difference it borrows Money which accumulates over time that's The debt now the debt limit is a Legislative limit that caps a total Amount of allowable outstanding U.S Federal debt it was introduced in 1917
When Congress voted to give the treasury The right to issue bonds for financing America participating in World War One In other words the treasury they can Borrow money to pay it for federal Expenditures but only as much as Congress allows it to now lifting the Debt ceiling was once a fairly routine Vote since 1960 Congress has raised a Debt ceiling 78 times and since 2009 America's national debt has nearly Tripled with annual federal deficits Averaging nearly one trillion dollars Since 2001. now the national debt is Sometimes driven by legislative or World Actions which require the government's Response including tax cuts on their President's Bush and Trump Wars in Iraq And Afghanistan entitlements like Medicare Part D and spending in response To the Great Recession in the covid-19 Pandemic now the debt ceiling is a Budgeted limit of what the government Can spend for every program contract Person employed building Road or Whatever as we approach that limit the Treasury takes measures to make sure That we stay within that limit with such Deep divisions in government right now Instead of just simple passage the Arguments begin the finger point starts When each political party tries to paint The other as wanting to tax spin or cut Programs and as a treasury does its
Calculations the actual point at which We cross a debt ceiling and can no Longer authorize payments tends to move Up and as we get closer to the exact Dates several things happen Each of Which will affect you negatively on January 19th of 2023 the United States Hit its debt ceiling beginning an Ongoing debt ceiling crisis now now in Response Janet Yellen the treasury Secretary she began enacting various Accounting Maneuvers known as Extraordinary Measures and on May 1st of 2023 Janet Yellen warned that the United States may run out of measures to pay Its debt obligations by June 1st of 2023. now there have been debt ceiling Crisis in 2011 in 2013. so we have a Glimmer of what will occur with this 2023 crisis but unfortunately this Current debt ceiling crisis may be far Worse than in previous years this year We find ourselves supplying a war Overseas still not recovered from a Global economic downturn suffering Through unprecedented inflation deep in A series of significant bank failures in With the looming commercial real estate Bubble now these influences and others Will be fuel on the fire here's what Happens in this debt ceiling limit Debate and how bad it could get if we Ever reach the point of default Temporary Extraordinary Measures now the
First extraordinary measure the treasury Takes is immediate spinning obligations From the cash reserves on hand now as of January 17th of 2023 the treasury had a Cash balance of 322 billion dollars now That may seem like a lot but your Government spends a lot fishing Wildlife And Parks Department of Homeland Security Medicare premium Social Security Department of agricultural Federal crop insurance department of Justice railroad workers retirement Federal employment retirement Department Of Veteran Affairs the Postal Service Unemployment insurance defense vendor Payments Child Nutrition program Individual and business tax refunds all Of these they barely scratch the surface Of monthly expenditures hundreds of Programs contracts and services they're All paid for each month so simply Surviving on reserves of cash on hand is Like paying your bills with savings when You might lose your job in about two Months now still these programs make up The first round of temporary Extraordinary Measures the treasury also Halts the daily investments in the Exchange stabilization fund operated by The treasury the ESF stabilizes exchange Rates by buying and selling foreign Currencies now the suspension of daily Reinvesting in this fund means that the United States has less influence on
Global exchange rates in the strength of The US dollar world's Reserve currency Finally the treasury can suspend the Seller's savings bonds stopped issuing State and local government series Treasury Securities now once a debt Ceiling and pass is resolved These funds Will be made whole so that the Beneficiaries are unaffected Progress is put on hold Is your city repairing potholes or Building a new traffic Corridor the Chances are that is being paid through Federal grants or with Federal money so Those projects they get put on hold does Your employer have a government contract Or is trying to obtain one well those Are going to be put on hold as well new Spending is suspended were you planning On retiring someday but you work for the Government post office or Railways no More money is going to go into that Until the debt ceiling is lifted your State is going to have to wait on that Federal funding that may pay your salary In some small part nutrition programs And other social safety programs they'll Get put on hold and eventually parks and Other services they end up closing and Workers are furloughed several days per Week were laid off now in some ways the Government is forced to downsize and Scale back operations and at this point You start to realize all the little and
Big things the government provides you With the economy already struggling Suffers the most the treasury Department's approach would be to Postpone payment events for all other Liabilities until it accumulated Sufficient funds to fulfill the whole Day's obligation now to clarify it would Postpone payments to agency contractors Social Security beneficiaries and Medicare providers rather than trying to Selectively choose which payments to Make on a specific day if you work with Any agency or under any contract with The federal government you can expect Cutbacks if you remember the last Significant debt ceiling crisis there Were a lot of furloughed workers National parks were closed and libraries Adjusted their hours so basically Everything slowed down and many worried About their paychecks progress was put On hold The dollar Falls Now the most detrimental related Consequences they're not as readily Apparent as a closed sign at the post Office or programs put on hold the debt Ceiling debate is a self-inflicted wound On the U.S economy and one of the major Consequences of this debt ceiling debate In the temporary Extraordinary Measures Is reduced household wealth and business Confidence these are the macro economic
Effects of debt ceiling brinkmanship any Potential default on the U.S debt has The potential to be catastrophic credit Markets could freeze the value of the Dollar could plummet the United States Interest rates could Skyrocket Potentially resulting in a financial Crisis and recession that could Echo the Events of 2008 or Worse encourage you to Think about that for a minute your Employer is not likely to take on that New contract or employee and expand the Business in such a climate neither are You likely to want to buy a house or to Make a similar big purchase with the U.S Economy about to collapse other Countries they see this continued in Finding failure to come to terms with Our debt and then they end up shying Away from buying U.S debt they start to Look for other currencies that transact In shedding their dollars held in Reserve for more translatable and Reliable currencies maybe that's the Chinese Yuan the Russian Ruble the Euro British pound or some other new brics Currency now over half the foreign Currency reserves globally they are kept In US Dollars hence an Abrupt decrease In the currency's value can impact the Treasury market as a worth of these Reserves goes down now if a default Occurs the US economy May face a Recession more severe and again I don't
Say this lightly than the Great Depression the International Financial System heavily relies on the US dollar And treasury secretaries if the impasse On the debt limit leads to a default on Treasury Securities it could be Catastrophic similar to or worse than The 2008 financial crisis now even Before we reached that point other Things can occur like the slashing of America's credit rating now that Actually happened in 2011 when America's Credit rating was downgraded to double A Plus from AAA Plus by standard and Poor's and as a result American Borrowing costs actually went up by 1.3 Billion dollars that year and when the Slashing of America's credit rating Occurs interest rates say Skyrocket and People worldwide begin to look for more Stable Investments outside of America Market instability Even if you don't have your own stock Portfolio your retirement account and Financial institutions do and has a debt Ceiling debate continues and edges Closer to the deadline that the treasury Cannot cross the financial markets steal Themselves up and shift their strategies To highly conservative and stable Investments not all of them are Successful as we just witness with the Disparities and the balance sheets of Silicon Valley Bank signature bank and
Now just most recently First Republic Bank which collapsed this year now Venture capitalists are less likely to Gamble in the future so they withhold Their funds Goldman Sachs economists They've estimated that a debt ceiling Breach would immediately halt about one Tenth of U.S economic activity credit Requirements tighten as interest rates Increase so business home car and Similar loans become very hard to obtain Social Security beneficiaries some 69.1 Million people would suddenly have Difficulty paying rent and utilities and That means 11 million landlords are not Received leaning income nor are utility Companies receiving the revenue that They require to operate efficiently and Maintain profits even Grocers are Selling fewer products as prices Increase in federal food assistance Programs get put on hold just these two Groups of Social Security recipients and Landlords they represent nearly a Quarter of the U.S population that would Immediately fill the financial impact of A potential U.S debt default all Businesses stop expanding and put Projects on hold and the real estate Market takes a significant downward turn Market conditions would likely worsen With each passing day and the collective Economy would slow to a crawl now since We are already in a deepening recession
Where we aren't exactly sure what the Bottom is this could be the push that Propels us over the cliff and again I Don't say this flippantly but it could Push us into a potential Great Depression now significant instability In one market can dramatically impact Other markets from Wall Street to Main Street from your elderly neighbors next Door to your kids school lunch program Unemployment surge many estimates and Studies have been conducted since 2013 To play out several different scenarios From getting close to that debt ceiling Date to an impasse lasting more than two Months where the treasury only takes Payments on interest and all the Scenarios will result in a loss of one To five million jobs Across America many Scenarios show only the slow recovery of Those jobs over several months or even Years now these unemployed people They're not just federal workers the Ranks of the unemployed will come from All sectors and walks of life businesses Will protect their bottom lines by Laying off some workers in tasking the Remaining workers with extra work pay Raises and cost of living increases They're going to be put on hold people Spend less on Services entertainment and Manufactured goods construction slows Restaurants layoff workers are closed Factory slow their production lines even
The military will look to downsize Operations and cut spending a debt Default would risk benefits for a 2.4 Million military members retirees and Four hundred thousand survivors of Fallen service members now also service Members pay in benefits can be put on Hold in all sectors of the workforce the Rates of unemployment will surge Where we are at now In February President Biden and speaker McCarty met for an hour in the Oval Office to discuss how to raise the debt Ceiling now they couldn't reach an Agreement but they agreed to continue Discussions in mid-april the limit saved Grow Act was presented by Speaker McCarthy a 320-page house bill that Proposed raising the debt ceiling by 1.5 Trillion dollars which would have Sufficed until at least March 31st of 2024. now this act narrowly passed the House but is deemed Dead on Arrival when It gets to the Senate there are only a Few things that can occur here first the Ranker could continue a little while Until the public level of discuss Becomes so great that the government is Really forced to let it go and raise the Ceiling or the debate could reach an Impasse and things begin to shut down Even as a rhetoric and blame game begins To ramp up or congress could abolish the Debt ceiling but that's very unlikely
And I'm not going to give it time here Now none of these outcomes are really Suitable for the economy or regular Consumers the debt ceiling debate 8 is Really shot in the arm for Brick's Alternate currencies and diminishes a Dollar's strength globally rather than Risking the full faith and credit of the United States lawmakers should focus on The underlying reason that we keep Hitting the debt ceiling in the first Place the structural imbalance between Spinning and revenues with the Government functioning as it does right Now it's not likely that we're going to Get the focus on the underlying reasons One thing is for sure the margins They're really thin in this debt ceiling Debate the limit save grow act it may Make it through Congress with Feinstein Still out but President Biden pledges to Veto it house Democrats are seeking a Petition process allowing members to Bring a bill directly to the floor Without the cooperation of leadership And the critical date when the Government can't make its payments could Arrive no earlier than the third quarter Of 2023 which would begin in July there Is considerable damage that will be done To the economy long before that deadline Arrives as we collectively get closer to That critical date in the debate blame Game continues Without Really any
Substantial change in how things are Done you can expect that the accounting Maneuvers of these Extraordinary Measures to become more sweeping and Severe you can expect that the US dollar In confidence in the U.S economy to Decline as will America's Global Influence you can expect that progress Will be put on hold the recession will Deepen inflation will move to double Digits and millions will suffer from Employment and security we're still in The early days of this but the crisis is Swiftly coming to a head here on my Channel if you go and do a quick search On our video tab for recession it will Show various videos that dive into Practical information along with Download guides that can detail steps That you can take now to insulate Yourself from this coming recession I'll Post a link in the description comments Section to these videos and I highly Recommend you begin to formulate a plan If you're concerned that this might Impact you what's your thoughts why does This keep happening over and over what's Your solution to this feel free to post Your thoughts in the comments section Below as always stay safe out there [Music]
