Treasury General Account Plunges by $100 Billion in One Week. How Close to Zero Will it Get?

“Debt Ceiling Farce 2021”: S&P threatens to downgrade the US by 20 notches to “D” if it defaults, which would be a hoot.

By Wolf Richter for WOLF STREET.

Now they’re all out there warning our brinksmanship-meisters in Congress about the consequences of a US default – even just a “technical default” – if the debt ceiling isn’t raised or suspended. S&P told Reuters today that, if the US were to default on its debt, it would downgrade the US sovereign debt from “AA+” by 20 notches to “D” for default (for your amusement, my cheat sheet for bond credit ratings).

Treasury Secretary Janet Yellen, when asked in Congress today if the damage from a US default would be “irreparable,” responded with, “yes.”

She said the government would run out of cash on October 18. The Congressional Budget Office said the government would run out in late October or early November. I said on September 5, based on the cash-outflow since August 1, that the cash balance of the government’s checking account, the Treasury General Account (TGA), would “hit zero near mid-October,” and that this out-of-money date could be extended by the announced “extraordinary measures” into November.

Whatever the precise date, everyone agrees: If the debt ceiling isn’t raised or suspended, the US government is going to default.

So now we’re sitting on the edge of our collective chair, watching googly-eyed the ridiculous farce over the debt ceiling. What we’re watching is how close the government’s checking account balance will get to zero, the so-called X-Date.

In theory, when it hits zero, that’s when all heck breaks loose, and members of Congress could lose a big part of their wealth in no time, which is in practice why everyone knows for sure for sure that Congress will most certainly doubtlessly for sure raise or suspend the debt ceiling before that happens, as Congress has done 78 times since 1960, according to the Treasury Department. Financial self interest always wins with Congress, for sure for sure.

But folks are getting just a tad nervous. Suddenly, “what ifs” are cropping up. If the Treasury market is faced with non-payment of maturing Treasuries, including the vast repo markets, well, that would be a hoot.

The Fed is dusting off some old game plans on how to deal with it in order to keep the Treasury market, and the global financial system, from seizing up. And the big banks are trying to figure out how to keep the lights on in their empty offices if this happened.

The balance in the Treasury General Account at the Federal Reserve Bank of New York plunged by nearly $100 billion over the past seven days, to $174 billion, as of Wednesday evening, according to the Fed’s weekly balance sheet released this afternoon.

In mid-September, thanks to quarterly estimated tax payments, the TGA balance rose for one week, but not nearly enough.

You see where this is going: $174 billion isn’t much of a cushion when $100 billion flow out in a week, and the government is barred from borrowing new money:

The TGA has been through some huge distortions. In the spring 2020, the Treasury Department issued $3 trillion in new debt to fund the tsunami of stimulus and bailout programs, but didn’t spend all of it, and the unused cash accumulated in the TGA. In January 2021, the Treasury Department began drawing down the TGA by reducing the amounts it borrowed to bring the account back to the normal range by summer.

Then the debt ceiling kicked in: The amount of the gross national debt outstanding on July 31, a monstrous $28.43 trillion, became the “debt ceiling” on August 1, that cannot be breached until Congress raises or suspends it.

The whole thing is a farce because Congress told the Administration in detail how much to spend and where to spend it, and when to spend it, including all the juicy pork for each member of Congress, and these folks in Congress now tell the Administration that it cannot borrow the funds that Congress told it to spend. That’s why it’s a farce.

It doesn’t accomplish anything. The debt ceiling never ever reduces deficit spending. That’s decided by Congress. It just puts a cap on new borrowing until the chokehold is released. The super-borrowing binge that invariably follows to fill the hole, and the unwinding of the all the “extraordinary measures” will cause me to write a headline, like, “US National Debt Spikes by $490 Billion in One Day,” or whatever.

Among the side effects of the massive drawdown of the TGA, from $1.6 trillion in January to near zero in a week or two, is a tsunami of cash for the economy and markets.

This cash in the TGA was raised by the government via selling Treasury securities that the Fed gobbled up in the spring. And this cash just sat in the checking account until the government began drawing down the TGA earlier this year. It distributed this cash without having to borrow it. This was effectively a massive bout of delayed QE, which flooded the economy and markets with $1.4 trillion in cash so far this year.

A huge liquidity injection into the markets! And it helped boost asset prices.

But the economy and markets were already flooded with cash from the Fed’s QE, and some of this additional cash ended up in money market funds, and they began buying short-term securities with it, including Treasury bills. This additional demand was driving up prices and driving yields below zero. For money market funds, it could mean “breaking the buck.”

That’s where the Fed’s overnight reverse repos (RRPs) came in. Under these contracts, the Fed offers Treasury securities in exchange for cash. The next business day, the deal unwinds, the Fed gets its securities back, and the counterparty gets its cash back. And then they make a new deal. Day after day, these deals unwind, and new deals are made.

The Fed started paying 0.05% (APR) on the cash it borrowed from the counterparties. This increased the use of the reverse repo facility and brought short-term yields above zero. And it has drawn ever larger amounts of cash.

This morning, the Fed took in a record $1.6 trillion in cash from 92 counterparties. Most of this is from money markets. But the amount was inflated by quarter-end window-dressing from banks that, for regulatory reasons, want to have less cash and more Treasury securities on their books. The last day of the quarter (today) provides the data for their quarterly balance sheet. Tomorrow, those RRPs with banks will unwind and the balance will drop somewhat. The end of December may produce an even bigger spike. And then as QE gets tapered out of existence, RRPs should start to calm down:

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  112 comments for “Treasury General Account Plunges by $100 Billion in One Week. How Close to Zero Will it Get?

  1. red says:

    Debt ceiling will be raised. Politicans would lose investment money and they hate that.

    • CRV says:

      Exactly what i though. the US will always get new credit. The jobs of those who decide about it, depend on it.

    • polecat says:

      Cold Bowl Nancy & her minions – both the Raspyberry and the Bluebloodberry flavors in crime – better order up soon, least they have a collective meltdown. Can’t have that now, can we .. sooo tis time for the filling of those $elf-licking CONgressional ice cream cone$ to commence!

    • Sierra7 says:

      “Put it on the card”!

    • Nick Kelly says:

      ‘and these folks in Congress now tell the Administration that it cannot borrow the funds that Congress told it to spend. That’s why it’s a farce.’

      Sorry, I don’t follow the US that closely. Specifically who are these folks?

  2. DawnsEarlyLight says:

    I get a painful ‘twinge’ in the posterior, whenever I get a glimpse of Wolfs ‘The Incredibly Spiking US National Debt’ chart. Thankfully, I always have my ‘copper fit’ underwear to slip on in times of national emergency!

    • MiTurn says:

      DEL, copper undies along with your tin hat.

    • roddy6667 says:

      I have already upgraded to the titanium and Kevlar shorts, expecting the worse.

    • Auldyin says:

      Don’t worry about it, I make it only growing at 7% compound pa which takes 10 years to double.
      That’s ages away, you can easily emigrate before then.

      • Auldyin says:

        Bigger worry, what would the US be like if the debt hadn’t/ won’t grow at 7%pa ???

  3. Richie says:

    US Debt and its ceiling will never matter as long as the US has its dollar hegemony, without it they won’t be able the leech the rest of the world, only then default can be likely. People should just ignore this matter now :/

  4. JeffD says:

    Hopefully they default, however briefly. Interest rates are at least 4% too low.

    • PJ says:

      Absolutely. Until interest rates go back to around 5%. Things will never sort themselves out.

    • historicus says:


      Right you are.
      For 7 decades, Fed Fund equaled or exceeded inflation….
      Now 5% below….never happened before..

      And the last time we had inflation near these levels, 30yr mortgages were 6% (1999 and 2006), now 3%. Why?

  5. Nathan Dumbrowski says:

    I believe they will let it default. Briefly and purposefully. It will be more a point of testing the new models out. What happens if they do default and we get reduced status on the S&P view of our sovereign debt? Yes, i know we are going to be assumed to have to pay massively to borrow our own debt from our own government. Really?

  6. Crazy Chester says:

    Burn it down. We-the-people are tried of this crap. Time for the Democrats to grow some balls and call bullshit before they ask me for money again. If folks in Congress lose a few bucks as a result, well it’s hard to see a downside to that event. If mortgage rates go to 18%, well then lesson learned. Might just solve a few supply chain problems and teach folks to pay attention instead of rushing home to catch what’s on NetFlix.

    And instead of squabbling about how to spend the money we are about to produce out thinner and thinner air, let’s repeal the tax cut to the 1% we borrowed the money for a couple of years back. That might get us under this artificial ceiling we seem to think is so important. Then let’s think of other ways to clawback money the government just gave away. Maybe some of the billions in ‘ppp’ and unemployment fraud. Or how about some the trillions we pissed away in Trashcanistan – a good amount of which is earning interest in Dubai. It’s time. Let’s see your cards and let the chips fall where they fall. Hey Congress, stop expecting the Fed to ride to the rescue and do your job!

    • Beatrice says:


    • Pavel says:

      Hear, hear!

      What pisses me off even more this round of this nonsense is that the Dems were supposed to be the “adults in the room” after 4 years of Trump chaos. Instead of sitting down on Jan 21st and saying “What do we need to address over, say, the next year?” they obsessed over a 2nd impeachment and the Jan 6th “insurrection” (which now seems almost to have been an FBI op).

      Why do they always let it go to the last minute (this includes the Repubs; I detest both parties)? Do they like the drama-rama?

      Term limits would be a good start. The USA is run by a bunch of septuagenarians and older who couldn’t program a microwave clock let along solve difficult financial issues, especially when there are so many conflicts of interest.

      Let it collapse and start over. Bah humbug!

      • Trailer Trash says:

        “The USA is run by a bunch of septuagenarians and older who couldn’t program a microwave clock”

        They refuse to relinquish control in part because they know their potential replacements are even less competent. This was a problem thirty years ago for the USSR and Eastern European states as well.

      • Petunia says:


        I have news for you, the dems in general don’t know how to run anything efficiently. They only know to care for your feelings, without actually doing anything about them. Incompetence is the order of the day, followed by corruption.

        The guy who runs the Port of Long Beach was interviewed on tv and he blamed the backlog of ships on covid in China. Really, he said that twice.

        I’m just wondering whose brother in law he is.

        • LK says:

          As if the answer was for anyone who had been living under a rock for two years. Next he’ll say that Biden is President because there was an election in November.

      • Nick Kelly says:

        ‘and the Jan 6th “insurrection” (which now seems almost to have been an FBI op).’

        Worthy of ZH.

      • polecat says:


    • Confused says:

      I generally agree with your points, but members of Congress are more concerned about themselves than about us.

      • MiTurn says:

        “Financial self interest always wins with Congress, for sure for sure.”

        True for almost every single politician in every single country in the world today, throughout the course of human history.

        Sociopathy always floats to the top.

        • polecat says:

          And here I thought that wigs, powder, rouge, and gilted extravagance were a thing of the past.

        • Powell is an insider trader, although maybe not directly. When he cut rates three times in 19′ because Trump threatened to upend the stock market by tweeting trade wars. The message was ‘save the stock market and yourself’, and he did. Now the trade wars are real and Powell says nothing. Would be interesting to have Liz Warren grill him on this. If enough committee members resign that implicates him by default. He clearly bowed to the presidents pressure on that matter and enriched himself. Would be curious to know what the ‘trading’ members of FOMC did after the secret release of the Covid memo,

      • JJ says:

        So true. Isn’t it amazing how rats like Paul Ryan or Bernie Sanders can have nothing but government jobs their entire lives and yet be multimillionaires today? Congresscritters first serve themselves. I am all in favor of term limits, but I’m not holding my breath that they will ever happen.

    • Citizen says:

      Yeah, it would be hilarious if it wasn’t so detrimental that Republican’s think their leaders are trying to do anything for them. The one and only thing they did was give a huge tax break to the rich and corporations… that’s it! That is their only goal as they don’t even talk about doing anything else….meanwhile they have people that think they’re “populists”, ugh.

      Imagine if we had spent the money from Iraq and “Trashcanistan” on healthcare and infrastructure … or just anything that’s actually for our citizens!?!?

      • Nick Kelly says:

        Iraq and “Trashcanistan”

        Same Pres launched both. Only one to follow Dad ( maybe dynasty not a good idea) and if there is one thing history teaches, it easy to get in and hard to get out.

  7. Giorgio says:

    DEBT Ceiling Raising number 86 since 1940!!!
    It’s a CIRCUS- Neverending Debt. The reality is that the market needs more T-bills. Look at the scary Reverse Repo. +400B$ in just 1 week. Now at 1.6T$. It’s a MONSTER!!! There is a T-bills shortage and by raising the debt ceiling they try to postpone (and make much bigger) the next market crash!! It- JUST my thought, of course.

    It is as if investors prefer to dream and imagine a world that does not exist rather than plunging into the reality of a state that will never pay its debts. Debts that, on the other hand, will continue to increase.

    • Alex says:

      It’s excess of cash, not t-bill shortage, that drives up reverse repo

      • Giorgio says:

        Whatever the true cause of the increases, the Fed and Treasury may soon reach crisis point if they continue. Increased banking regulation over the years from Basel and Basel II has led to an increase in the use of government securities as collateral. With such large RRP volume leading to huge demand for T-bills, a shortage of T-bills has developed that will seemingly only worsen as the Treasury looks to scale back their auctions. Fed Chairman Jay Powell acknowledged as much in his recent testimony to the House Financial Services Committee, stating “You could say there is a shortage of safe short assets… there’s a shortage of T-bills”. This is not a sustainable position. The US simply cannot keep up with demand for its debt and is nearing the limit on borrowing, the “debt ceiling”. Back at the end of June, Treasury Secretary Janet Yellen exclaimed they may “exhaust emergency measures” to avoid breaching the debt ceiling “as soon as August”, going on to implore Congress to step in to avoid a potentially “catastrophic” default. In more recent news, on July 28th, the Fed announced it was creating separate standing repo facilities to try and support money markets, but we have yet to see how effective this action will prove. With legislation unlikely until October or November the collateral shortage will most likely worsen – the result being a weakened financial system one global margin call away from crisis.

        • Wolf Richter says:


          There is no “shortage of T-bills” or other safe assets. There is a HUGE EXCESS OF CASH after all this money printing by the Fed. Duh. Clearly, the Fed doesn’t come out and admit that they printed way too much money, and now this is causing big problems. Instead, they — and others — have come up with some braindead excuse, such as a T-bill shortage. It’s one of the dumbest excuses I’ve ever heard.

          The solution to all these problems would be to unwind the $4 trillion of QE that the Fed did over the past 18 months. It should let roll off and sell $4 trillion in securities over the next 18 months, and the excess cash issue would largely go away.

  8. NJB says:

    Everyone knows the US Government will never really default on its debt. At worst, it would only be a technical (temporary) default. There are plenty of reasons to sell risk assets, but this isn’t one of them.

    The whole thing is a farce and a great example of how dysfunctional the US political system is.

    • Old School says:

      True. This is the system Congress itself created over many years. Fiat money. A compliant Fed with utopian mandates. A debt ceiling. Negative real financing. Roman Empire 2.0.

      • MiTurn says:

        “Roman Empire 2.0.”

        Agreed, OS, et. al.

        • BuySome says:

          Let’s just lable it REII: The Power of the Farce so they can issue some lines of In-Action Figures just in time for the next ToyFair. Maybe a retro-Kenner package to boost sales beyond the production ceiling. The kiddies will love it, especially if they can get out a graphic novel and a cartoon movie (subscription only) with lots of big name voice-overs. Who needs reality anymore?’s just around the corner!

      • Anon1970 says:

        The Roman Empire’s decline lasted almost three centuries, from 117 AD (maximum territory under its control) to 410 AD (sacking of Rome). I suspect the US decline will be much more rapid.

        • VintageVNvet says:

          Maybe so A, but more likely to take about the same amount of time, similar to many such hegemonies over the centuries IMHO.
          Look at several such since then for likely timing, such as the continuing power of ”GREAT Britain” in spite of all of it’s not England parties wanting to get out yesterday or last decades, eh?
          Others, such as Ottoman, various in Asia and ”middle east” etc., have taken centuries, and have also included massive ”come backs” sooner and later..
          While I would be very happy to have some other safer and more sane place(s) in which to invest, good ol USA still looking the best for long and medium investment, SO FAR!

  9. Jack says:

    I don’t believe the US have any fiscal problems !!

    The printer is ready on the stand by , we’re off to minting our TRILLION dollar coins now. 😎😎😎

    We’re living in the realm of Fantasy, everything is virtually possible, just ask our friend Pow Pow!!

    Before commenting, please read my previous comment regarding Chinese government’s huge problem with evergrande .

    The possibilities of a huge Fuckup are basically limitless now.

    It’s Time to order Apple and its sisters to head back to nth America and share the cost of the trillion dollar newly minted coins .

  10. otishertz says:

    The us will never go BK as long as our govt debt is denominated in US dollars which have been shown to be unlimited in supply.

    This is more a problem with the EU and its denominating its debt in a multinational currency. That makes all EU debts de facto foreign debts.

    Look at evergrande. Their problems will come from foreign debt.

    I don’t like it the way it is but the USA will never be even able to default on debts in its own currency.

    • Jack says:

      Keep Dreaming.

      • otishertz says:

        I guess you missed how the fed bought essentially all of the trillions in treasuries issued in the last 18 months.

        Stop sleeping.

        • Jack says:

          Read the history .

          Or better still don’t. As you’re a new member of fantasy land.

  11. Mojer says:

    You are very right Wolf this is all a farce of politicians towards their constituents in fact there is absolutely no serious action to reduce the budget but on the contrary to increase it to the maximum with steroids.

    The end of an empire can only be seen in the slow devaluation of its currency until its rapid and unexpected collapse.

    It can be seen from now that those in debt are among the next victims of what is to come in all the world no only in China or England.

    Those with no debt will be the only ones who manage to get through this dangerous future, probably near.

  12. historicus says:

    I blame the Fed.
    The REAL COST of borrowing was removed by Fed policy, and the politicians went wild…and still try to engorge themselves on the cheap money.
    The real cost of borrowing controls borrowing levels. The Fed dispensed with this.
    It may be too late.
    The Taylor Rule leaps to mind… more of this misguided Fed policy.
    Enough … 12 years (excepting 2018) of feeding asset prices off the back of the earners and savers of this nation.

  13. Old School says:

    I think we are in trouble. Fed is telling lies. They knew they were going to create inflation this year with all the money printing. Just fooled us by couching it in slick language that they were going to let inflation run slightly above 2% for a few years.

    Government is getting what they want which is to spend big and have central bank inflate it away.

    • historicus says:

      “Stable Prices” is their mandate/instruction……the agreement under which they are allowed to operate and exist.
      Promoting even a 2% inflation peels 22% off the dollar in ten years…..throw in a couple 5% years…..and what do you have? NOT stable prices.
      Never has there been this inflation with such a difference between the rate and the Fed Funds.

      • joe2 says:

        It’s all lies. Why bother yourself about pointing it out? Just do your own planning for what they will do, not what they say.

    • phleep says:

      This democracy (and its politicians) lacks guts to actually pay for the government services being demanded. The rightists posture about their righteousness while they are at the trough consuming public goods like everyone else. The leftists go on about fairness meaning I want more free stuff. This creates politicians who print but never get actual revenue to pay for things, slowly sucking blood out of the economy. Public goods are truly valuable, but I detest the posturing.
      So, inflation is the actual tax, loss of purchasing power.

      As long as my home and stock values look good, whoopee! But my personal debt is 2% of my assets — I can fall quite a ways before being underwater. I’ve been working on this for some years. I can only hope it will be enough, not to keep me in clover, but to keep my lips above the waterline. Yes, I have found it possible to live below my means in California, and accrete wealth.

  14. Marco says:

    Taper is not going to happen. It’s inflation all the way now …

    • Bobber says:

      We are getting toward the end. The decision is now 1) do we taper, watch the markets tank, then reverse the taper a month later or 2) do we make up some excuse for not tapering. In either case, great financial instabilities are likely to surface.

  15. polistra says:

    Wolf’s debt ceiling graph is a picture worth ten trillion words. You can clearly see the line resuming its upward journey without any change after each brief notch.

    Anyone who still thinks this stupid gimmick is worth fighting about should have his face rubbed in Wolf’s graph.

    • MiTurn says:

      “Debt out the wazoo” (© WS) is not sustainable…

      As an extended family, we’re preparing for the Great Depression 2.0. Congress and the FED seem hellbent on bringing it about.

  16. Rcohn says:

    Suppose the US is rated D.
    Does that mean anything for the 10 year

    • ChrisR says:

      It means it’s highly unlikely the Malt will be given chance to mature for another two years.

    • Auldyin says:

      No, but it means all other countries will be rated F***me.

  17. joe2 says:

    Why the fuss? Default is just transitory.
    The Fed can always just print up a bunch of money and send a check to the Treasury as a contribution and just keep it off the unaudited books, or not.

    Now get back to work and earn some dollars for your taxes that House Budget Committee Chairman John Yarmuth (D-KY) says are not needed since “The federal government can afford anything that it feels it needs to do.”

  18. Spencer Bradley Hall says:

    The FED’s Ph.Ds. in economics are actually running the economy in reverse. And they’ve backed themselves into a corner. This began in the early 1960s. We’ve been on a self-destructive course ever since.

    Economists will destroy free market capitalism. We will end up with state capitalism, and a command economy. You see, economists don’t know a debit from a credit. Banks don’t lend deposits, deposits are the result of lending. Ergo, all bank-held savings are frozen, lost to both consumption and investment. That reduces velocity. That reduces AD. That reduces CAPEX.

    Take Japan, “”Japanese households have 52% of their money in currency & deposits, vs 35% for people in the Eurozone and 14% for the US.”

    • Sierra7 says:

      “Economists will destroy free market capitalism.”
      I beg to differ….
      “Free Market Capitalism” will (by definition and actions) will destroy civilization.
      I just can’t imagine a world where “free market capitalism” can exist alongside a healthy society.
      Free market capitalism must continue to suck out the life of natural resources with the eternal hope that those resources (even in outer planetary dirt) can be replaced.
      Either we come up with a better “participatory” global economy or we will perish sooner than later.
      Even Adam Smith disagreed with the premise that “free market capitalism” (unconstrained by any regulation or rules whatsoever) is the way to go.

      • phleep says:

        Smith assumed certain unspoken regulatory forces would keep things within limits, including human venality. He projected his own decency onto others who did not deserve it. It was too great a leap in the Enlightenment to imagine the scale of human enterprise, finally crashing into the outer tolerances of the biosphere (I would date to Hiroshima, 1945, for when we should reasonably have started to imagine, and pivot). Smith’s respectable bakers and pin-makers couldn’t possibly put that dent in the (endless) world, could they? What a sweet dream of reason and prosperity it was! It would conquer all.

        And yes, there is a name for unlimited, unregulated growth: cancer.

        There is the knife edge of our age’s dilemma. I think just maybe we can thread that balance between vitality, quality of life, and ruin, but the margins are narrowing. Fast. Half of the USA thinks we can just dream and pray the problem away, go pedal to the metal and just drill, cut, build and burn (tacky luxury hotels, of course. Bigger flashier everything). And the other half likes to think its lifestyle is different, which is a lie. The green ethics marketing lie is the most despicable.

        My less imaginative secular Enlightenment acquaintances (their archaism means they are not friends) threw out the real ethics with the Christianity (and ancient philosophy). They are the stupidest (while populating our centers of higher learning).

        Meanwhile, apropos of today’s topic, there is a frenetic, hilarious-tragic wallpapering show to watch.

  19. Young says:

    Technically speaking, can the Federal Reserve “donate”, say, $2T (small percentage of its balance sheet) , to the Treasury Department?

  20. KK says:

    Here is what I’m confused about if someone could help me understand.

    So yesterday the Congress passed the stop-gap funding bill that’s supposed to extend the government funding through 12/3/2021.
    Does this stop-gap funding have any impact on the balance of the Treasury General Account?

    1. If it does increase the TGA balance, where did this money come from if there is a hard stop at the debt ceiling?
    2. If this stop-gap funding doesn’t increase the TGA balance, Treasury would still run out of cash by mid October and the 12/3/2021 date doesn’t matter?

    • Wolf Richter says:

      Two separate issues. the stop-gap funding bill is about appropriations (who gets what, if there is enough cash); the TGA is about cash to actually pay stuff with.

      • KK says:

        Thanks, Wolf.

        That means the stop-gap funding bill doesn’t add any more cash to the TGA, and TGA could still run out mid October.

        Treasury could then invoke “extraordinary measures” to move around cash from wherever available to avoid defaulting and extend the true deadline by a couple of months at most.
        Congress will have to settle the debt ceiling by then.

        • RedRaider says:

          Re: extraordinary measures

          Not that it matters much but it would be the President that decides who gets what not the Treasury.

          At least that my understanding.

    • Trailer Trash says:

      I have the same question. I’m thinking that Congress has just now passed a short-term spending bill for the new fiscal year but has not allowed Treasury to borrow the money to be spent.

      It’s hard to tell what is happening since the media is all about click-bait and eyeballs and promoting agendas.

      • Bobber says:

        There’s a reason media won’t explain it. It’s complicated, and most peoples’ eyes would glaze over.

        This world is full of people who like talking more than thinking, and listening more than thinking. In short, the demand for thinking is low, and so the supply is low.

        • MCH says:

          In my best Greta voice: “How Dare You!!!” To imply that people are too stupid and can’t understand the details.

          And stop with this supply and demand talk, you are giving me a headache. The world is burning and all you can talk about is your silly supply and demand.


    • MCH says:

      If I understand correctly, it’s two different things.

      Debt ceiling means we refuse to left debt get any higher, in turn the US loses ability to borrow (meaning no more bond auctions) and can’t pay its interest, which forces a default.

      Stop gap funding is meant to keep the government from shutting down, effectively saying, we will keep paying with borrowed money to keep things running.

      Debt ceiling is a joke… it was started by the Dumbos, but has been used so often as a political football on both sides that it’s akin to the left hand or the right hand having a gun and pointing it to its own head and saying…. Yeah, yeah, I am really gonna do it this time…. (Really done by the way of non-cooperation, passive aggressive idiocy at its worst)

      The funny part though is that the debt… or more accurately, the velocity of debt is ridiculous and no one wants to deal with the problem. The only one who managed anything along that line was Slick Willy, he actually had the velocity of debt moving in the right direction. Then Jr came in and screwed it all up… of course their successors found ways to make it even worse…

      If you get one word out of those Debt out the Wazoo charts, it’s acceleration.

  21. Mike says:

    The debt limit was never really about limiting spending, or holding the debt in check. It was never really about defaulting. All the talk about that is a distraction. And it’s working.

    The debt limit is part chess and part “chicken”. Who will position themselves the best and who will blink first. Neither side will allow the US Govt to default. The “game” is to see who can win by sliding their agenda items into the vote to increase the limit. And how close to the deadline they can do it so no one really sees the agenda items get added. Forcing the other side to vote for things they don’t want to avoid a default. That’s the game we should follow closely. But we don’t because we are distracted by the hand waving.

    • Trailer Trash says:

      “The debt limit is part chess and part “chicken”.”

      Personally, I prefer a chicken in every pot and a car in every garage rather than chickens behind certain steering wheels and madmen behind others.

  22. Peanut Gallery says:

    Wolf, how comfortable are you disclosing your various investment moves (if any)? I’d love to receive some more direct guidance from you.

    • Wolf Richter says:

      Not a good idea, for many reasons. I’m not a hedge fund. And I’m not a financial advisor.

      • MCH says:

        WHG; the Wolf Hedge Fund, that’s a great idea… and bah, who says you have to have any certification to play with other people’s money. Just look at Bernie… Madoff that is, he was in charge of how much money, and what certification did he have.

        You could invest in cryptos, commodities, play around with currency…. and pay fantastic returns by doing crazy stuff like shorting stocks, and then using that money to buy put options.

        Crazy like a fox…. no…. Crazy like a Wolf.


        • Auldyin says:

          First question to any financial adviser.
          How come you’re offering to make me rich and not sunning yourself on a Bahama’s beach???

        • MCH says:


          The response is obvious. Because I’m a nice, altruistic human being. And if you don’t believe that… go F*** yourslef.

          It’s like anyone selling you stuff to get rich quick, it’s a lie. But if the general populace is uneducated… well, idiots and their money are soon parted.

      • BuySome says:

        Don’t worry…once the WSJ gets around to labeling you as “King of the Beer Mug Futures”, the whole financial media will be knocking on that telephone pole to get your take on space exploration. Good luck trying to get in naps after that!

      • Peanut Gallery says:

        Can you at least publicly answer this question:

        Which areas and/or data are you consistently the “most right” or most accurate in your predictions on?

        • Wolf Richter says:

          Peanut Gallery

          “Which areas and/or data are you consistently the “most right” or most accurate in your predictions on?”

          I’m very accurate predicting sun rises and sun sets; moon rises and moon sets too; and tides. You can rely on those. Gravity too. There are a few others like that. As for the rest, hmmmm.

        • MCH says:

          Wolf, you forgot the caveat on this items… which is only on Earth.

        • Wolf Richter says:

          Yes, and I probably forgot some other small print.

        • MCH says:

          See… you are just the right guy to start a hedge fund… your thoughts went to small print immediately.

  23. DR DOOM says:

    I always hope for the Default, but lose every time. A paid vacation for the hero minions in government and punishing people by shutting down parks will be the worse out come. Wolf also may have been grinning while composing his post. And that ain’t bad.

  24. Spencer Bradley Hall says:

    We should be watching the money stock, not the TGA. It dropped dramatically in August. And that’s probably due to the O/N RRP facility uptake.

    “Today “monetary policy” should be more aptly named “interest rate policy” because policymakers pay virtually no attention to money.”

    • Wolf Richter says:

      Money stock may include the TGA since the TGA is a checking account.

      • MCH says:

        Just look at how TIPS ETF have gone up this year. Stretch that back to when they were conceived, and the trend since 2019 to now is like the stretch we had from 2009 to 2013.

  25. Anton says:

    They just raised the debt for the next month, so crisis averted for next 30 days. Tune in for next crisis starting right…..NOW.

  26. Petunia says:

    I saw an interview with a guy who is considered an expert on social security. He was asked if a default would stop the checks from going out. He said the SS fund is stuffed with a specific issue of treasury securities that cannot be sold on the open market. The SS treasury securities can only be redeemed by the treasury dept. If the treasury is out of money, they cannot redeem the securities held by SS to fund the checks. He said it is possible that the trust fund may have to stop checks, if they can’t redeem their IOUs.

    Which leads me to make another point about reverse repos. If a treasury default occurs after a rather large reverse repo day, it would be in the fed’s interest to keep the cash, and break the RRP. Why would they take back worthless paper.

  27. If they pare back the spending bill that should be good for financials, the excess money they have already put in the system will churn over into stocks. The real danger is if economic growth exceeds the ability of the money supply to provide investment capital, and how could that happen? Really? Higher yields signify tight money and some of that at the moment is the bottleneck in spending. The debt ceiling rebuff is negative spending which implies more QE. The real answer lies after the midterms if progressives increase their influence. Right now everyone is mulling over historical precedent, gains for the party out of power, but the real story is the spending bill, how far it goes. Once working people see child care and stuff they aren’t going back.

  28. MCH says:

    AA+ to D; ha ha, that’s hilarious, I’d like to see if the ratings agency actually has the balls to do that.

    On the one hand it’s like walking off of the empire state building, a line straight down.

    On the other, it tells me that the rating agencies should all be disbanded because they are so clueless, usually debt should be rated on the ability to pay, and the more debt you have the worse the rating. Yet, here, you’d actually have to downgrade the debt 20 notches at once, is there even a precedent for such nuttiness. Because it just smacks of incompetence, I know finances is all about confidence, but a 20 notch downgrade sounds like there is a monkey running the shop, and he was given a crayon.

    • Paulo says:

      Good comment. The rating agencies were just a wee bit compromised during the GFC awarding confidence to institutions when they should have shouted “Fire”. I suspect the true rot will be papered over for a while yet. What I call rot is that there is no real economy anymore. Consumerism is not an economy. Spending money you don’t have is not an economy. Certainly debt might be required when times are tough or a necessary push is on. WW2, Covid, Great Depression, natural disasters, etc. But debt forever normalised? Unsustainable with a day or reckoning is on the horizon is what I believe will and should happen.


  29. Michael Gorback says:

    Remember August 2011? Probably not. That’s when we lost an “A”.

    Ron Paul had an interesting proposal back then: the Fed gives a $trillion in bonds to the Treasury, which then destroys it, wiping out a trillion in debt. The fly in the ointment was that the Creature from Jekyll Island is privately owned by a group of banks and it would violate their property rights.

    As if we needed another reason to hate the Fed and big banks.

    • Anon1970 says:

      Standard & Poor’s meekly downgraded US Treasury debt from AAA to AA+ back then. Moody’s was even afraid to make this small downgrade. Both rating agencies probably feared retribution from the government if they downgraded the debt to a more appropriate level.

  30. Bobber says:

    These degenerate politicians are only concerned about talking points in the next re-election.

    This time it’s the Republicans trying to gain political advantage by making an issue of the debt ceiling. Aren’t they the folks that provided a $2T tax cut in 2017, financed entirely by debt. It’s like somebody saying they bought you a gift, using YOUR credit card.

    Then Democrats attempt to tie the debt ceiling raise to the $3.5T spending package, as if to say “I want all the popsicles, or I’ll spit on everything”.

    The whole charade would be an insult to collective intelligence, if we had any as a nation.

    Don’t listen to any fool who is a strong supporter of Democratic or Republican parties. They are non-thinking robots.

    • MonkeyBusiness says:

      You are saying the Democrats are not the good guys????

      Mind blown.

    • MCH says:

      Don’t forget to mention Jr and his insane wars…. Or Audacity of Hope for continuing and expanding on the same.

      Not to mention the untold damage done by both in making too big to fail into impossible to fail

      • gametv says:

        Both democrats and republicans have led to our current morasse

        – Clinton let China into the WTO with no conditions and he also signed bills that killed the divide between wall street and main street banks and derivatives limits. So we can thank that putz for the housing meltdown and all the jobs shipped overseas that stripped manufacturing
        – Bush started the endless wars with Iraq and Afghanistan that cost trillions of dollars and destroyed our moral leadership in the world
        – Obama gave us Obamacare that didnt strip a single cost out of the heathcare system, but simply moved cost from certain people to other people – result is healthcare costs that skyrocketed double digits each year for a decade (OK, I dont have the exact figures)
        – Trump used completely ineffectual tariffs to attempt to limit the economic advancement of China, but failed to deliver any changes that would bring jobs or production back to the US. But Vietnam sure owes Trump a big thank you note for pumping its economy.
        – Biden – Spending vast sums of money on top of vast sums of money recklessly in an attempt to appease a rabid squad of misfits who have never had real jobs.

    • gametv says:


      People say that voting for any other party is a wasted vote, but I say that if more people voted against both R and D candidates, things would finally change.

      Just as the opposite of love is not hate, but apathy, the biggest challenge to the power of politicians is not to vote for the other political party, but to vote for something other than the two political parties altogether.

      Defund Republicans and Democrats.

  31. gametv says:

    What you are not saying Wolf is what happens to the interest rates the market requires to buy up all this debt?

    Think it through.
    – The Fed cant really increase purchases of bonds beyond the current $100 billion a month due to inflation. They would need to announce that and everyone would start yelling about inflation if they do.
    – So the markets need to buy all that debt
    – Central bankers around the globe have ceased most QE and the big buyers of Treasuries – China and Japan are only holding or reducing balances
    – The Treasury can choose maturity dates on the debt. So do they try to keep long term rates lower by issuing only short term notes and bills? But the problem with that is that the debt will likely need to be rolled over soon. When interest rates are this low, you want to lock in long term debt, so it doesnt get refinanced at a higher price later.

    There were auctions at the beginning of 2022 that saw tepid demand, so what happens to rates if there is tepid demand and the market knows that there is a pile of debt to be funded in a short term?

    The simple answer: much higher interest rates are on the horizon.

    There were two Federal Reserve chairmen who resigned due to active trading in their accounts. I think those guys didnt want public scrutiny on the trades they are about to make to profit from this catastrophe.

    • MCH says:

      The answer you don’t want to hear is negative interest rate.

      At which point, I will take a risk of having my money all in cryptos or stuck in China.

  32. Auldyin says:

    “Treasury Secretary Janet Yellen, when asked in Congress today if the damage from a US default would be “irreparable,” responded with, (a fragile) yes.”
    Every time I see JS on Tv I think a case should be brought against USA for ‘Elder Abuse’.
    To have such a small, frail, elderly lady carry all the horrific problems of the US economy, when she should be in our cocoa and soft biscuit circle doing jigsaws and playing Scrabble.
    Just sayin’

    • Wolf Richter says:


      That’s nasty age discrimination that you’re spouting off here. She’s about 74. So what? And you’re dissing her for being short and not overly fat.

      There are plenty of substantive reasons for criticizing her, but not her age, her height, and the fact that she is not too fat.

    • Auldyin says:

      Did I just get woke-shamed from California?
      I didn’t say or think any of the words you attributed to me.
      If I can’t feel sorry for my frail elderly granny still working in the potato fields at 70+ without being chided for ‘nasty age discrimination’ then I must disagree. People get frail as they age, that’s a fact. Or at least it used to be, like so many things nowadays.
      In my view, all elderly ladies deserve to be protected from stress and anxiety as a simple matter of basic human respect.
      I was merely making the point that a 70+ lady was currently in the most stressfull position in the World. Her wanting to do it doesn’t make it right. I referred to her size only in relation to an impression of ‘fragility’ as per ‘a sparrow’ and not, in any way, as discriminatory in terms of height or weight or anything else.
      What is sad to me is that, apparently, in USA there are no young men or women ready and able to take up this enormous burden. Maybe that’s an old-fashioned opinion but being old-fashioned doesn’t make it wrong. No comment re the President, it’s your country, do what you like.

  33. ru92 says:

    Good post Wolf.

    Those Fed financial engineering guys are pretty smart. They always seem to be able get out of a jam.

    Reverse Repo. Genius

    • Nathan Dumbrowski says:

      Triple forward Repo reverse is what I have a wager on with the Easter bunny.

      They sure have come up with enough new and interesting twists over the last 18 months.

      This is exactly why I think the next chapter is something never heard of before like a default on debt or better yet another full round of stimulus to ease with all the shortages and bottlenecks and inflation

  34. Robert says:

    Treasury Secretary Janet Yellen said damage from a US default would be “irreparable,” She said, “If we can’t get authorization to pull money out of thin air, we’ll run out by October 18.” Asked if this sort of action is in keeping with the idea of “full faith and credit,” she responded “Let me tell you where you can stick your full faith and credit.”

  35. Bob says:

    Many years ago Greenspan let a terrible truth slip during an interview. “I can guarantee that the US will never default on its debt. I, however, can not guarantee the purchasing power of the dollar.”

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