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As the US inches closer to the prospect of defaulting on some of its payments, there has been a flurry of suggestions on how the government could buy time before negotiators reach an agreement to raise the debt ceiling. Sell the properties. Re-evaluate gold in Fort Knox. Invoke the constitution. There’s one idea that hasn’t gotten much ink: special drawing rights.
SDRs are assets issued by the International Monetary Fund that can be converted into major currencies (dollars, euros, yen, etc.), and are used as a means of providing aid to developing countries. But America also has over $150 billion in assets.
One way the Treasury can push back the X-debt: by borrowing from the Fed against these assets, which, due to government accounting, will not count against the debt ceiling. And it could theoretically give the US until August, said Lou CrandallWrightson is chief economist at ICAP, one of the firms that most closely tracks the inflows and outflows from government coffers.
Those assets are held in the Exchange Stabilization Fund, which MM readers may recall was the pot of money used to make emergency Fed loans during the pandemic.
Crandall says: “ESF resources played a key role in the Fed-Treasury pandemic response as well as the current regional banking turmoil. I really hate to be the Treasury Secretary who wasted that resource on the debt ceiling fight. Even if Congress agrees it should be refilled, which is far from guaranteed, it will become part of the standard toolkit in calculating future X-dates, which will reflect the Treasury’s ability to address future bouts of financial instability. will cause obstruction.
There is another reason to doubt the feasibility of this option. “Anything that puts the Fed into the fray seems an uncertain proposition at best,” said Shai Akbus, economic policy director of the Bipartisan Policy Center. “If they’re doing it in the absence of a deal and it could lead to a political firestorm, it doesn’t seem likely that the Fed would be willing to do that.”
For their part, Treasury and the Fed did not offer MM guidance on whether it would be considered.
But this is a perfect microcosm of the situation in which the Treasury finds itself. Technically, the government could find clever ways to prevent default, but that would only push back the deadline, not make it go away. And there is a price to be paid for America’s standing in the world, said Simon Johnson, former chief economist at the IMF and now professor at MIT.
To sell SDRs directly, the Treasury would have to go to another government and exchange them for their currency and then find a way to convert it into dollars – something Johnson called “a public relations nightmare”. Borrowing through the Fed would be much easier, he said, but again, “it would be a loss of prestige for America”.
“Even pledging them to the central bank is a bit embarrassing,” Johnson said.
Today is Friday We hope you had a great Memorial Day weekend. That is, unless you’re one of the people responsible for making us work over Memorial Day weekend. If you’re one of those people, send tips, gossip, and suggestions to Sam [email protected] and on zach [email protected],
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Commerce will release April PCE data at 8:30 a.m. The median estimate for core PCE is 4.6 percent … Consumer sentiment survey data is out at 10 a.m. … … IMF Managing Director Kristalina Georgieva at 1 p.m. on the US economy holds a briefing
almost there? , Our Catherine Tully-McManus, Daniela Diaz and Jennifer Sholts: “With seven days until the earliest possible federal default, negotiators are inching closer to a deal, according to several people close to the talks, as Republicans and the White House work Close the gap significantly at the level of spending.
“Leaving Thursday afternoon from Speaker Kevin McCarthy’s office, Rep. Patrick McHenry (RN.C.) said negotiators are ‘on the approach on so many issues.’”
– McHenry gave another update later in the afternoon: “I think there’s a sense of understanding from both teams that we still have serious issues to work through and come to terms with. And that’s going to take some time, he said, per NBC’s Frank Thorpe,
But, but, but – Don’t turn off notifications for Memorial Day weekend just yet. Even if a deal is announced later or over the weekend, the leadership still has to whip up votes with narrow majorities in both houses.
— Some House Republicans are already turning up their noses in areas where President Joe Biden and McCarthy’s envoys have drawn closer. This includes agreements to lift the debt ceiling through 2024, a process to encourage Congress to pass all 12 spending bills and plans to claw back unspent Covid money, Olivia Beaver and Sarah Ferris report .
— and some House Democrats are claiming that the Biden administration’s messaging has put them in a position to make concessions on key policy areas. “The president should be out there,” said Rep. Rosa Delaro of Connecticut, the top Democratic appropriator, according to Jennifer Haberkorn and Adam Cankrin.
— Meanwhile, Mike Lee (R-Utah) in the Senate on Thursday. tweeted that he would “Use every procedural tool at my disposal to block the debt-ceiling deal that does not include substantial spending and budgetary reform. I fear things are headed in that direction. If they do, that proposal will not be able to pass easily in the Senate.
Mistake is not the only bad result Mark Zandi, chief economist at Moody’s Analytics, told our Caitlin Emma and Jennifer Sholts that once the US starts defaulting on payments, “things go from bad to worse, catastrophic” in a matter of days.
Treasury’s cash balance is now less than $50 billion. “It just shows you how close we’re getting to the abyss,” Gennady Goldberg, strategist at TD Securities, told Bloomberg. “While some in Congress question Treasury’s math, I think the cash balance pretty much says it all: We’re going to go over the cliff very soon. Honestly, we’re on borrowed time.
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new york hedge fund founder Anthony Scaramucci The likes of former New Jersey governor Chris Christie for the Republican nomination in 2024.
“You need someone to take on Trump who has a stomach for Trump’s bullshit, and can prosecute Trump on Trump’s platform. The governor has that skill — he has that ability,” he told your host. Said to. The rest of the GOP “don’t know the nature of that beast like Chris Christie. They don’t have the moxie to take on Trump the way Gov. Christie does.”
Christie, who offered Trump one of his first major endorsements after wrapping up his unsuccessful bid for the GOP nod in 2016, has become a prominent critic of the former president since 2020. The combative former governor left office in 2017 with dismal approval ratings but has maintained ties to major Wall Street donors, including the billionaire New York Mets owner steven cohen, Christie now joins the team’s board of directors.
Christie’s has not formally announced but is expected to announce its decision in the coming weeks. A name that’s cool with a mustache? Florida Govt. Ron DeSantis,
“He doesn’t have the verbal dexterity. He doesn’t see the punches coming. And he doesn’t know how to respond to punches, how to deflect punches and then respond to punches,” he said.
Sure, but what if Trump eventually gets nominated?
Scaramucci, who served a famously brief stint as Trump’s communications director, said, “I will do everything I can to support President Biden — or whoever he may be the nominee for the Democrats — because you have a president.” As Donald Trump can’t be.” in 2017 before being sacked.
Yesterday’s MM is getting old like milk — The S&P 500 and Nasdaq climbed Thursday on strong earnings from chipmaker Nvidia, which dragged down tech stocks. Meanwhile, according to Reuters’ Noel Randwich and Shreyashi Sanyal, even after another credit rating service threatened the US with a possible downgrade, “investors saw signs of progress in US debt ceiling talks.”
– Reuters’ Lucia Mutikani: “US labor market resilient; Falling profits are a red flag for the economy.
Jeffrey Epstein- The NYT’s Matthew Goldstein: “JPMorgan Chase is facing a reckoning for its nearly 15-year relationship with the disgraced financier, which could lead to a huge payout in two civil lawsuits that claim the bank Ignored warnings that he was trafficking teenage girls for sex as it was profiting from his relationship with them.”
pressure campaign Bloomberg’s Alastair Marsh: “The world’s largest climate coalition for insurers has started bleeding members after the Republican attorney general charged the group with antitrust violations.”
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