September 27, 2021–As the U.S. Senate got ready to vote on a resolution to fund the government and raise the breeched debt limit, officials from the Federal Reserve warned about dire consequences that could take place if the Treasury runs out of cash.
John Williams, president of the Federal Reserve Bank of New York, warned about an “extreme kind of reaction in the markets” if the U.S. Congress would raise the current debt limit. The limit of $22 trillion is well below the current debt of $28 trillion, the GER reported in July. He said the U.S. Treasury market is at the center of the global financial system. If it stops functioning due to running out of cash, the global economy will feel it.
“If you actually crossed that line and got to a place where the government wasn’t paying off its obligations, I think it would create a very negative dynamic not only in the US but around the world,” Williams said, as reported by the Financial Times.
Congress is considering several major pieces of legislation this week, including the debt limit authorization, an infrastructure package and a $3.5 trillion spending bill.
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