The “Extraordinary Measures” that the Government Uses in the Debt-Ceiling Farce to Delay a Default

The government can manipulate the gross national debt to keep it below the debt ceiling while issuing new debt. But not for long. Then the game is over.

By Wolf Richter for WOLF STREET.

Periodically, we get to watch our favorite farce, played out in Washington DC in front of a bedazzled world, a product of true creative genius that only American politicians could ever come up with: the Debt Ceiling Farce. This one is the Debt Ceiling Farce of 2023. We’re in the middle of it now, the point where the plot starts getting funny. The funny part is how close the government’s checkbook balance will go to zero before the farce is over.

On March 31, there were $194 billion in the government’s checkbook, the Treasury General Account (TGA) at the Federal Reserve Bank of New York, according to the Treasury Department this afternoon. During the two Debt Ceiling Farces of 2021, in October and in December, the balance dropped to $46 billion and $42 billion at the respective low points. During the Debt Ceiling Farce of 2017, the balance dropped to $39 billion. With the huge amounts of money that flow into and out of this account on a daily basis, that was pretty close. Congress then went ahead and lifted the debt ceiling, and the farce was over and everyone went home.

But the cash in the TGA account is only one factor. The other factor is something called the “extraordinary measures” – and we’ll get to them in a moment.

The ending of the farce is already known: Congress will agree on a deal at the last minute, as it has done around 79 times since 1960, and seven times over the past decade.

If they don’t agree on a deal, the US government will default on its obligations, hopefully starting with Congressional salaries, benefits, pension payments, and toilet paper.

But because lawmakers in Washington have stashed lots of their personal wealth in the markets, they’re sensitive to a US government default blowing up said wealth from one day to the next. And with their personal wealth at stake, they’ll get this worked out for sure.

It’s a farce because Congress already appropriated the funds to be spent, telling the Administration in detail via legislation how to spend those funds, and then Congress tells the Administration that it cannot borrow the funds that Congress told it to spend. This whole process is accompanied by all kinds of hilarious rhetoric for the entertainment of us all.

On January 19, the US gross national debt hit the debt ceiling, set by Congress at $31.4 trillion. The Administration now cannot increase the gross national debt. And it has remained flat since then. But note what always happens the day after Congress lifts the debt ceiling: the debt spikes! (We’ll get to the circled event in a moment under “Extraordinary measures at the end of the fiscal year?”):

For example, after the last two debt-ceiling farces ended in October 2021 and in December 2021:

On October 13, 2021, Congress lifted the debt ceiling. The next day, the gross national debt spiked by $300 billion! Over the next seven business days, the debt spiked by $480 billion!

On December 15, 2021, Congress lifted the debt ceiling. The next day, the gross national debt spiked by $298 billion in just one day. In total, over the 11 following business days, the debt spiked by $709 billion!

From October 13, 2021, through December 31, 2021, over those 11 weeks, the gross national debt spiked by $1.19 trillion, LOL.

When the Debt Ceiling Farce of 2023 is over, you will see another one of my articles, with the headline, “US National Debt Spikes by $500 billion in One Day,” or whatever.

But the debt doesn’t spike by a gazillion dollars in just one day because suddenly the government sold a gazillion Treasury securities. Far from it. Treasury auctions are planned in advance and continue throughout the debt ceiling farce.

What triggered those spikes of the debt in one day is the system of “extraordinary measures.” And it has always been this way. Here are the seven debt-ceiling farces over the past decade. You can tell that the one thing the debt ceiling never actually does is slow down the growth of the debt.

The “extraordinary measures.”

All these debt ceiling farces do is force every Administration to jump through some hoops, called “extraordinary measures” – and Congress is fully on board and is informed about them, which is also part of the farce.

On January 19, 2023, Secretary of the Treasury Janet Yellen – as her predecessors had to do also – sent a letter to Congressional Leadership, notifying them that the debt ceiling had been reached, and that the Administration would begin using “extraordinary measures” going forward.

These “extraordinary measures” center around various federal government trust funds and other federal accounts, mostly government pension systems (military retirement, civil service retirement) and the Social Security and Disability Trust Funds (combined $2.83 trillion), plus the Medicare account.

In her letter to Congress, Yellen named two of these funds: the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. And she wrote that “by law,” the funds “will be made whole once the debt limit is increased or suspended. Federal retirees and employees will be unaffected by these actions.”

Normally, these trust funds invest the cash coming from their contributors into special non-marketable Treasury securities (often called “Intragovernmental Holdings”).

Those non-marketable Treasury securities were at $6.89 trillion at the time Yellen sent the letter to Congress. They have since then dropped by $93 billion to $6.76 trillion currently. They dropped because the government didn’t issue them to the full extent normally needed. This pushes down the gross national debt.

“Extraordinary measures” at the end of the fiscal year?

You have noted the “circled event” in the chart above. So here we go. Non-marketable Treasury securities can be sold essentially with a click of the mouse to funds that hold trillions of dollars and have lots of cash to invest. Since the issuer of these securities and the buyers of these securities are within the same government, the timing of issuance can be played with up to certain limits.

I mean, look, I’m not going to say that Yellen did anything funny to make the debt look better at the end of its fiscal year. I mean, she used to run the Fed and supervise the banks etc. etc., and she’d never do anything like that. But look at the second chart above, at the circled event, at what happened the day after the last fiscal year ended.

On September 30, 2022, the end of the fiscal year, these non-marketable securities amounted to $6.629 trillion. This put the overall gross national debt at $30.92 trillion – just under the nasty $31-trillion bar.

And the next working day, October 3, these nonmarketable securities jumped by $200 billion exactly in one day, and the gross national debt leapt with ease over the $31-trillion bar, to $31.12 trillion. And then they jumped by another $30 billion over the next two days.

Meanwhile, marketable Treasury securities continue to balloon.

Since January 19, when Yellen sent Congress the debt-ceiling letter, the amount of regular Treasury securities outstanding – those that everyone can buy and trade – increased by $96 billion to $24.69 trillion — compared to the $93 billion drop in non-marketable securities, and so the total debt remained roughly flat at the debt ceiling of $31.4 billion.

Treasury auctions are still taking place, the government is rolling over maturing debt at these auctions, and it’s also issuing new debt. Hence, the net increase in marketable Treasury securities since the debt ceiling was hit:

Combined, non-marketable Treasury securities and marketable Treasury securities make up the $31.4 trillion in the gross national debt. By lowering the amount of non-marketable securities, the government can keep adding to its marketable Treasury securities outstanding, and thereby add to its actual debt, and raise more cash.

But there are real-world limits to this game of “extraordinary measures,” when this game can no longer be played, and if the debt ceiling will then not be raised, the US government will start defaulting on some of its obligations – starting hopefully with Congressional salaries and toilet paper.

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  189 comments for “The “Extraordinary Measures” that the Government Uses in the Debt-Ceiling Farce to Delay a Default

  1. Carlos says:

    Why can’t the government just stop spending so much of our grandchildren’s money?

    • jon says:

      Then how can they buy votes ?
      The main concern is how to buy current voters and enrich friends families elites aka masters , who cares about grand children!

      • Leo says:

        For every penny spend on voters, the government has spent a dollar on corporations to make the billionaires richer.

        I don’t support free handouts to either.

        Today all markets are broken with negative real rates (10 year – cpi) and most of corporate America cannot tolerate interest rates based on risk to reward.

        • Mr. House says:

          Shhhh you aren’t allowed to point out we are bankrupt. It’ll soon fall under disinformation like covid ;)

        • Nacho Bigly Libre says:

          Agree. Those dollars are not spent on the voters. They’re spent on donors.

    • cc says:

      Too keep the complicit grandparents happy?

    • Nemo300BLK says:

      The grandchildren are the problem. They don’t want to work, and they don’t want to pay for their useless college degrees.

      • random guy 62 says:

        We didn’t start the fire.

      • BP says:

        The social contract has been destroyed with bailouts, QE and moving goal posts. Why would any young person support this system or participate?

        • Zaridin says:

          Having taught these supposedly lazy and intransigent young people for over 20 years, they are far more informed and globally connected than most of us were at their age. They are plenty smart, but it doesn’t take a genius to figure out their grandparents and parents built the massive debt *before* those young people were born just so those same grandparents and parents could avoid the hard math and live large. Now we’re mad at them because they don’t want to “work hard” or “follow the rules.”

          We saddled them with this s**tstorm, then wonder why they want no part of it? We squandered the era of cheap and easy oil on golf-courses and huge cars, poisoned the environment they are expected to prosper in, voted in politicians as corrupt as any Roman senator…and we wonder why depression, suicide, addiction, and malaise seem to be the order of the day for them?

          We older generations are unable to come to grips with our own sins, and instead fall for the old trope of projecting it out onto them. Looking around the world we left them, I’d spend all damn day on TikTok too…

        • Zaridin says:

          So, yeah, BP I’m with you. We older folk broke the social contract, so why would we expect THEM to follow it?

        • NBay says:

          Very well said Z.

    • longstreet says:

      The Senator from PA, Toomey, floated an idea years ago that smacked with such common sense I have not forgotten it…

      His idea was to create a list of prioritized spending categories, a hierarchy of necessary spending at the top, and the unnecessary at the bottom.
      When there is a budget crisis, you start shutting off the spending items from the bottom up.
      Just like a household might do in a tough financial condition.

      His idea went nowhere legislatively. Which in itself speaks volumes on how Washington DC operates.

      • Swamp Creature says:

        “If they don’t agree on a deal, the US government will default on its obligations, hopefully starting with Congressional salaries, benefits, pension payments, and toilet paper.”

        This is great news!!!! Bring it on!!!!

      • guerre says:

        Whose programs get the short straw- was he suggesting we start with federal funding for PA?

    • eg says:

      Because our grandchildren also inherit all the assets? That’s why it’s called a “balance sheet” eh?

      • Boris says:

        They already have a list – and it’s very clear from all the self-preservation decisions of the oligarchy and their apparatchiks. The needs of the people never made it on that list.

      • Zaridin says:

        You mean all that paper money, poisoned and exhausted soil, depleted oil reserves, and non-existent mineral deposits? What a bargain for them.

  2. Bubbajohnson says:

    Well Mr. Wolf, you do NOT seem surprised by any of this. I am surprised how easy our Govern ment got US like this. Am wondering if many feel we have and have had an out of control Govern ment for some time?

    • Wolf Richter says:

      “Out of control?” you’re kidding. Very much controlled. Everyone wants to feed at the big trough of the government. The richest corporations in America are lining up to gulp down tens of billions of dollars right now, such as the semiconductor makers. Every member of Congress has to “bring home the bacon,” meaning pork-barrel spending for their district, with military equipment being a prime example. Every member of Congress exacts their pound of flesh for every vote. There is nothing out of Control. We voted those people into office because we want them to bring home the bacon to our district, and if they don’t, we complain. Now the commercial real estate industry is lining up for bailouts. This never ends.

      • Shandy says:


      • Bubbajohnson says:

        Freedom is never more than one generation away from extinction. We didn’t pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same. Voted for the person that said this. Back when votes did matter. Sorry, Govern ment hasn t represented me for decades.

        • NBay says:

          Maybe because you personally didn’t kill enough “enemies?

          The government keeps track of that, you know.

      • Eric says:

        “But there are real-world limits to this game of ‘extraordinary measures,” when this game can no longer be played…”

        What are the limits?…exactly.

        “This never ends.”


        • Wolf Richter says:


          Read the statement again that you cited. What is says is this:

          The “extraordinary measures” have real-world limits. This is very specific. It’s not the debt or games in general or whatever. It’s these “extraordinary measures” that I explained in the article that have limits.

        • phillip jeffreys says:

          I understand Wolf to be stating that the hocus pocus involving trade-offs in marketable/non-marketable securities is constrained by legal/limitations inherent to the trust funds being plundered. The funds themselves can become insolvent.

      • TimTim says:

        Maybe it does end one day.

        Slowly, then all at once, a la Hemingway..

      • Winston says:

        Exactly, just not so much in the control of voters. Not just the “debt ceiling” a farce. Actually “bringing home the bacon” depends upon what is described in the last paragraph below.

        Follow the science ™!

        Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens [Princeton University, 2014]


        A great deal of empirical research speaks to the policy influence of one or another set of actors, but until recently it has not been possible to test these contrasting theoretical predictions against each other within a single statistical model. We report on an effort to do so, using a unique data set that includes measures of the key variables for 1,779 policy issues.

        Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic-Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism.

        In the United States, our findings indicate, the majority does not rule—at least not in the causal sense of actually determining policy outcomes.

        When a majority of citizens disagrees with economic elites or with organized interests, they generally lose. Moreover, because of the strong status quo bias built into the U.S. political system [that describes the overwhelming influence of the administrative state and lobbyists – W], even when fairly large majorities of Americans favor policy change, they generally do not get it.

        To be sure, this does not mean that ordinary citizens always lose out; they fairly often get the policies they favor, but only because those policies happen also to be preferred by the economically-elite citizens who wield the actual influence.

      • longstreet says:

        “A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years.”
        Democracy in America, DeToqueville (1805-1859)

        • LK says:

          I’m reading this now. I hear good things.

        • Zaridin says:

          Or Alexander Fraser Tytler. Either way, still a great quote.

        • NBay says:

          That is looking at the wrong end. The only solution is a Constitutional Maximum Net Wealth and and the IRS becoming FULL part of the military. The Coast Guard already enforces economic “cheating” like drugs and fake Gucci bags. $10-$15M is plenty “incentive”……give those great entrepreneurs who consistently come in higher and contribute a damn statue or something. And use the money to get a massive Green New Industry going no matter who’s economic big toes get stepped on.
          Can’t say as I think much at ALL of Milty or Kipling, and Biden is just another old politician for sale…..FWIW.
          Dictatorships VERY are nasty….like Corporations.

        • NBay says:

          And if you are worried about IRS regulation/corruption, just remember the Military can take over anytime it damn well pleases…..believe me.
          Or ask a Roman Senator…..not quite sure why you chose that example in post above.

        • robert says:

          Actually, the ancient Greeks found that out in about 5 minutes, responsible people complained about it, and others wrote about it.
          A better quote, concise and all-encompassing would be:
          ‘There is nothing new under the sun’. – Ecclesiastes 1:9.
          I’m not usually a Bible guy, but there’s also something in there about a 7-year business cycle, and the whole business of government ‘economics’ is to try to prevent it by spending money it doesn’t have until the whole rotten mess collapses.

        • NBay says:

          “I’m not usually a Bible guy”

          So go find some other “sacred truths” and come up with a more pleasing viewpoint……there are hundreds (if not thousands) of them for you to choose from.

          Better yet, invent your own diety….that isn’t new under the sun either.

      • BENW says:

        “During the Debt Ceiling Farce of 2017, the balance dropped to $39 billion.”

        I am shooting for $0.00 this time around. Not going to happen, of course, but one can dream.

        No, I don’t think many of us voted these politicians into office to bring home the bacon. A clear 70% of voters want a balanced budget amendment. Granted, it would take years to implement without blowing everything up, but it can be done.

        For now at least, agreed that this never ends, sir!

      • Swamp Creature says:

        The commercial RE industry is not going to get bailed out. There will be riots it this happens. I will join them.

        • Swamp Creature says:

          Purge this above comment. On second thought, a better course of action is to patronize commercial establishments that conform with your values. Hitting them in the pocketbook is a guaranteed winner.

      • Zaridin says:

        Spot on, Wolf.

        WE voted these bozos in. When did we ever vote in a politician who said they were going to have to raise taxes and/or decrease spending?

        I’ll wait.

        The thing that pisses off so many Boomers is that the current political system – and its politicians – reflect perfectly the Boomers themselves; their priorities, greed, selfishness, lack of empathy and altruism, ignorance and arrogance.

        We are reaping what we sowed.

        • NBay says:

          Us hippies tried to tell you… the basics across at least…we just weren’t very political…..and a lot just plain sold out….for more “stuff”.

  3. joedidee says:

    now IF CONgress actually lived within its means
    ie it SPENDS no more than it collects in REVENUE
    then we wouldn’t have this far-side comic
    I don’t think I’ve ever seen a ‘balanced’ budget in my 60+ years

    • josap says:

      Clinton balanced the budget.

      • The Duke says:

        No he didn’t.

        The lie that gets repeated over and over again.

      • Publius says:

        With Gingrich et al. Actual budget process: (Presidential proposal >) House Ways and Means Committee > House floor (including motions) > Senate Finance Committee > Senate floor (motions, filibuster) > Conference Committee to resolve differences > House and Senate floors > President (if vetoed, back to floors for override votes, etc.)

      • gl says:

        What kind of economy did Clinton inherit and what did he do to balance?

        • Harrold says:

          Bush lost in ’91 because the economy was bad.

          “Its the economy stupid’ -James Carville

      • Einhal says:

        This misleading meme is getting really tiresome. First, Clinton did not balance any budget, or even create one. All the President can do is sign or veto the budget sent to him by Congress. Clinton signed the “balanced” budget that Newt Gingrich’s House of Representatives sent to him.

        Second, while it’s true that the U.S. didn’t borrow money that one year by issuing treasury bills directly to investors, it DID borrow money from the Social Security trust fund to fund general operations. The trust fund had a huge surplus because the boom generation was at the peak of their earning years, and a bubble economy heading into the .com collapse was generating a lot of earnings and tax revenues.

        In other words, the supposed surplus was due to a set of factors unlikely to repeat anytime soon.

        So if the implication of your post is that all we need to balance the budget is for the evil GOP to get out of the way and let those saintly and wise Dems into full power again, and all will be well on the fiscal post again, it’s extremely disingenuous.

        It’s very much like the stupid meme that blue states “subsidize” red states.

      • Harrold says:

        So did Nixon.

        If those two can do it, anyone can.

    • Top Gun says:

      what you mean is if WE lived within our means.. it’s easy enough to balance the budget,, cut Social Security by a trillion plus dollars,, oh, you don’t support that,, ok, cut defense spending to Zero.. and then cut 200 billion or so from the rest of the discretionary budget, don’t like that,, well cut Medicare by a trillion plus,,,
      It takes BIG cuts to balance the budget and very few voters like myself recognize what it takes to balance the budget let alone would support Trillion dollar cuts to the federal budget…,,

      • The Duke says:

        Why cut Social Security?

        It is about the only government program that has a surplus and continues to do a decent job.

        Had the US government not had its zero interest rate policy for so many years the fund would have an even bigger fund.

        • Harrold says:

          He’s not talking about cutting his Social Security, he’s talking about the other guy’s Social Security.

      • Digger Dave says:

        What about the trillions that have been removed from the budget via artificially low tax rates? Why does all this balancing the budget talk only focus on the expense side of the balance sheet?

        It seems that one team has focused 100% of it’s efforts on cutting taxes for several decades and the other only does lip service to raising them back to reasonable rates, and if they do anything, they only marginally move them up to create the appearance that they are doing something.

        Ridiculously low tax rates for corporations and the extremely wealthy has been an extraordinary kick in the nuts for the working class for decades – try starting your own business in any field without VC or tech money and your jaw will drop for how hard it is to overcome the self employment tax wall. Just when you think you’re able to take a big step and hire someone you find out that our business friendly government ideology doesn’t apply to you when your tax person informs you that you’re now in the big leagues, and by the way, we’re going to need $20,000 more for taxes.

        • Einhal says:

          Corporations pay 21% of their income to taxes and the extremely wealthy don’t pay a lot of taxes because they don’t have a lot of income (they usually borrow against investments). All of the proposals to raise taxes (including using idiotic memes about Buffett’s secretary’s tax rate) are to raise the top brackets such that the “working rich,” meaning professionals who go to work every day, pay more. They already pay between 40-55% depending on where they live. How much is too much?

        • Bricks says:

          Agreed that higher income has to be part of the solution. A couple of points though – corporate marginal rates might be moved higher but the real issue is the complexity of the code and how taxable income is determined. Depreciation and amortization and all the incentives built into the system are the problem. It is so complex it can be mind boggling. This is why so many big companies pay low effective rates. This is basically the problem of low effective rates to the super wealthy also – an overly complicated system of perverse incentives.

          The other point is that more of the working class needs to pay something – 40% of households pay 0 federal income tax. That isn’t a healthy system either.

        • Harrold says:

          Getting more federal tax money from poor households will make them poorer. This will require more federal taxes on poor households which will make them poorer. This will require more federal taxes on poor households which will make them poorer…

    • CRV says:

      The whole trick is to live within somebody else’s means.

    • NBay says:

      Was close enough to call it “balanced” pre-Reagan-bot….and then KABOOM!

      …….and it never stopped……..

      See “feeding at gov’t trough” above.

      60+ and a kiddy screen name? Plus all the obvious lies? Stupid or senile……Just my opinion.

  4. Gen Z says:

    Is it me or did that debt double in 10 years from 15 trillion to 31 trillion?

    How will this be repaid if Congress and politicians refuse a pay cut to pay the national debt?

    • jon says:

      Not a problem, they can print to ad infinitum.
      Don’t believe me,? Just look what they have been doing for last decade or so.
      Also, no thread to USD as reserve currency for few more decades at least.

    • Desert Dweller says:

      A lot of people falsely believe that the govt debt has to be, or should be, repaid to zero, this is not the case. Governments and large corporations have no need to pay their debt to zero since they are presumed to live on in purpetity. Why would they pay off the entire debt this since it would drastically reduce available capital? What is important for governments and large corporations is to manage their debt so that the debt service remains affordable.

    • Mr. House says:

      It was only 7 or 8 trillion in 2007 -08.

    • Don says:

      Simple; don’t adjust the tax brackets for inflation. The 80% on taxable incomes will pay more to fund the budget while the 20% on non-taxed incomes make out like bandits, especially the top 1% and their patrons in congress, like Madam Nancy.

  5. indi says:

    Biden’s Budget Proposal Estimates Debt Will Hit $50.7 Trillion in 10 Years !!!

  6. John says:

    And the band played on.

    If there are, in fact, “real world limits” beyond which “this game can no longer be played,” please identify them. That would be very useful to know.

    • Wolf Richter says:

      Read the statement again. What is says is this:

      “But there are real-world limits to this game of “extraordinary measures,” when this game can no longer be played, and if the debt ceiling will then not be raised…”

      What is says it that the “extraordinary measures” have real-world limits. This is very specific. It’s not the debt or games in general or whatever that have limits. It’s these “extraordinary measures” that I explained in the article that have limits, ending in the default of the government.

      The government cannot default because of the debt because it controls its currency, but if Congress blocks the government from issuing new debt to fund the outlays, then the government will default on those outlays.

      • Juliab says:

        Hahaha Wolf but do you think congress would ever veto the debt I don’t think so because as you said congressmen are on the feeder

        • phillip jeffreys says:

          Or the non-sequitur of the identity between the spenders (Congress) and those refusing further debt (Congress).

  7. Bs ini says:

    Many of your articles are a real hoot with this one near the top! Keep up the comical satire as we watch the congressional salaries and support staff fall to …., (rise to whatever! )

  8. Brian says:

    Wolf, I may have missed it in this or previous articles, but what are the real-world limits? Is it a reduced incentive to buy or hold US debt? That’s the part I’m not understanding is that the limits seem to be only self-imposed.

    • Wolf Richter says:

      In the real world, there are no limits for debt issued in your own currency. What happens is inflation. It’s sort of a default on fixed-rate debts. Inflation drives up tax receipts too, and as the purchasing power of this debt gets eaten up by inflation, and as tax receipts rise with inflation, the burden of that debt becomes more manageable. That is always the solution to excessive borrowing in your own currency. But high inflation means high interest rates, and as the whole economy adjusts to those higher interest rates, things can get pretty rough.

      This is already starting to play out.

      • Shandy says:

        And ignorant consumer general public propitiation unaware the calmness, the intent remedy, the throw me towards the complacency of the everyday hedge for tomorrow.
        The sign said long hair freaky people need not apply, so I tucked my hair up under my hat and asked them why?

        • NBay says:

          “Don’t follow leaders, and watch the parking meters.”

          All I ever needed to know to happily bump along near the (USA) bottom for over 75 years, now.

        • NBay says:

          Should say IN the USA, AND European.

      • Flea says:

        Wolf could you do an article about libor to sofr markets ,seems to be a nudge problem in about 4 weeks .I don’t understand this debt turnover

      • Robert says:

        Bingo! Inflation! Why are we all experiencing dealing with this out of control inflation, i.e. groceries, real estate, energy, air fares, etc.? Because of the massive government spending (endless money printing) during pandemic i.e., PPP, forever unemployment, multiple Federal and State stimulus payments (that most middle income and up people didn’t need), unheard of low mortgage rates, car loans, endless Fed money to State and Municipalities, etc. all in the need to keep everyone spending, so the whole US economy (and the same with other global economies) didn’t crash and burn. Inflation is the game congress plays to hide the real cost of US debt. Many people fall for this game.

        When you forever spend like the Feds, you either need to raise taxes (unpopular) to adjust for spending or you cut spending or inflation ramps up eroding consumer purchasing power. But as several previous posts point out, where do you cut spending because the lobbyists and special interest groups ramp up pressure on congress to continue this circus.

        • Flea says:

          In January they were still naming out $20 billion a month ,per Daniella Demartino Booth ,by the way she used to be on fed board . Now runs Quill capital,very smart lady

        • grimp says:

          “middle income and up”
          Please define this. We received nothing in the form of stimmies, PPP, etc – there was a definite CAP on stimmies that excluded much of your “up”. Just getting ready to write another decent chunk to the IRS in a week. Now PPP on the other hand, I would imagine that is where the real money was for smb.

      • MooMoo says:

        There ARE Limits. Those limits are set by the world’s willingness to purchase the debt issued. THAT is what is starting to play out. They’re issuing so much debt the primary dealers can’t unload them to the world anymore. We’ve run out of buyers. Saturation had be achieved. If they go back to issuing and buying their own debt, they’ll have to do it at a multiple of QE1 and 2 and an unravelling will happen quickly.

        Default is upon us because there are limits. Sovereign debt default is getting ready to enter the arena.

        • Wolf Richter says:


          If your theory were true, yields would be spiking but they’ve plunged (price jumped). Which means HUGE demand, crushing your theory.

  9. old school says:

    There are whole departments that probably be eliminated. I believe I graduated high school about the same time Department of Education was founded. Not sure they can justify they have improved things.

    Whoever determines washing machine standards probably ought to get axed as well. Who ever thought it was a good idea to wash dirty clothes with 4 gallons of water?

    • Halibut says:

      Education has been a progressive dumpster fire ever since Jimmy started the department of indoctrination.

      But, hey, he was a great guy. He started habitat for humanity. You know the thing where you can spend your weekends building a house for someone who can’t afford a house. Lord knows it would be inhumane for any of these folks to live in an apartment.

      Can you even imagine? Living in an apartment???

    • VintageVNvet says:

      Graduating HS 1979 seems awful recent for someone who is old school??
      OTOH, I agree in general about Dept of Ed not actually improving the situation, but only generally.
      Certainly seen some locations where the local systems were SO low as to seem the teachers were marginally illiterate, and those areas have improved a lot…
      Biggest error IMHO was the push for everyone to go to college and the GUV MINT involvement in the incredible ballooning of cost and subsequent student debt.
      ”Back in my days” in HSs, there were many students taking classes on ”real stuff” while working for wages or piece work part time at said stuff or similar. Lots of my peers had very marketable skills by HS graduation.

      • Apple says:

        Back in the day, states provided funding to colleges and football coaches didn’t make $10 million a year.

        • andy says:

          I’ve read football coaches had actual jobs in some point in time. And so did the players. Not sure what to make of it.

      • TheAltonRoute says:

        And then build gigantic fitness centers, pools, etc. The country really has gone bonkers in the past several decades. I’ve seen a few colleges in Italy. Dumps compared to what we have in the US.

    • Digger Dave says:

      Don’t forget that the DOE has overseen a huge push for educational testing, which has left out and gutted, by picking winners and losers, shop classes, civics class, home economics, business education (balancing the checkbook, learning how interest actually works), psychology, physical education and health. Our kids are taught to the tests and yet, are dunces – command of the English language is at an all time low.

      I’m in the trades and also do a lot of general contracting for my clients. Whenever I collect a proposal from a tradesmen who is 45+ years old it is always well written and understandable. When it comes from the younger crowd it’s sometimes laughable. I’ve sent a couple back and told them to work with their mom or dad (to make them presentable).

      The DOE can go. Local education should sink or swim on it’s own. This should be a state issue. The consumer protection bureau is also a farce and has had no impact on society.

      The NHTSA, under the DOT, brings you more expensive cars while road fatalities actually are increasing. The DOT siphons your tax dollars away and then sends them back to states in ransom form, forcing them to build new things they don’t need (while ignoring existing maintenance, which is not sexy). And then our money goes to very large companies that make our road construction costs the most expensive in the world.

      When you go down the roster of federal agencies, your start to realize that the game is rigged. I’m all for shifting things back to the states but not naive enough to believe it will have any effect other than making graft local again.

      • CB says:

        So true, no child left behind was one of the worse bi-partisan pieces of educational legislation in the last 20 years. It has left so many children behind.

  10. Bernard Mitchell says:

    “But there are real-world limits to this game of “extraordinary measures,” when this game can no longer be played, …

    I dont get it Wolf, WHAT ARE THE REAL WORLD LIMITS? There doesnt seem to be any.

    • Wolf Richter says:

      In the real world, there are no limits for debt issued in your own currency. What happens is inflation. It’s sort of a default on fixed-rate debts. Inflation drives up tax receipts too, and as the purchasing power of this debt gets eaten up by inflation, and as tax receipts rise with inflation, the burden of that debt becomes more manageable. That is always the solution to excessive borrowing in your own currency. But high inflation means high interest rates, and as the whole economy adjusts to those higher interest rates, things can get pretty rough. This is already starting to play out.

      • Keppered says:

        In until it don’t
        Banks reverse course any day now.
        Reverse Course means more of the same English blabber field EU death to the nation skidmore (not the university).
        Funny as it is banking institutions change course without me.
        I get the bum sod off eff yer lousier mate!
        Laugh till yer green.

      • Natron says:

        I guess ppl don’t read the comments, or your two replies before this. Nice copy – paste lol. Also thanks for the explanation.

        Am just curious how long u think it’ll take for hyper inflation to kick in? And with higher interest rates where’s the crossover to where interest exceeds the intake of taxes? Interest payments are already almost a Trillion a year so they point to % of GDP instead….

        • Natron says:

          I mean so far, it doesn’t look like Avg Joe wages can keep up with inflation and if you don’t tax the corporate overlords to cover the increases, how’s that work out?

        • Anon1970 says:

          In Germany’s case, it took less than 10 years for its currency, the old Reichsmark, to go from about US 25 cents (in 1913 under the gold standard) to about 4 billion to the US dollar in late 1923. I wonder if Janet Yellen has ever read “The Rise and fall of the Third Reich”?

        • eg says:

          I suppose your analogy might have relevance, Anon, were the US making war reparations after losing a major war?

          Whence come such ahistorical notions, anyway? Education in America is in a parlous state.

      • MooMoo says:

        re above

        pull out a 5 or 10 year chart of the 10-year. Yields are spiking. You are talking 6 months best I am talking over a 5-year period.

        Crushing who’s theory?

  11. All Good Here Mate says:

    “ But because lawmakers in Washington have stashed lots of their personal wealth in the markets, they’re sensitive to a US government default blowing up said wealth from one day to the next. And with their personal wealth is at stake, they’ll get this worked out for sure.”


    A lot of these people are quite wealthy to begin with. Nonetheless, it’s amazing how many of the ‘average’ shmoe congresspeople come out many times richer. Gravy-train. That’s all it is. There’s no way this doesn’t get worked out.

    • Doolittle says:

      Theft from the people is what it is, in do many ways.

    • Digger Dave says:

      It’s also amazing how many wealthy people obsess about gaining more wealth. When you read about creative corporate executive compensation packages for CEOs, my first thought is always, does this guy actually do anything besides think of ways to extract more wealth from the corporation?

  12. Paul says:

    No worries, it will keep working.. until it doesn’t.

  13. gametv says:

    I love this article. But there is some distortion here.

    The debt ceiling is a contrived process that politicians put in place to force themselves to vote on an increase in debt, which can be used as a way to provoke real debate and negotiations on spending. Not so say that it every really constrains spending, but in the absence of a debt ceiling, would there be ANY coverage of this runaway debt?

    But calling the debt-ceiling a farce is a rhetorical way of undermining it, and blaming politicians who want to restrain deficit spending by using this vote as a way to force a negotiation about spending.

    Al Gore called global warming an “inconvenient truth”. Our runaway deficit spending is also an inconvenient truth. The truth is that we need to force politicians to have real discussions about this, or it will destroy our democracy.

    • Halibut says:

      I agree that we need politicians to have some serious discussions about debt and deficits.

      However, none of this is a threat to our democracy because we don’t have a democracy. The United States is a republic.

      • gametv says:

        Halibut – you had me at “we need politicians to have some serious discussions about”….


      • Venkarel says:

        I actual think it is an oligarchy on its way to an aristocracy (this is hyperbole but then…).

      • MM says:

        I think gtv was using ‘democracy’ to refer more to the overal cohesion & social/economic function of the US as a society, rather than a specific system of governance.

      • Jack Hank says:

        Ross Perot had serious discussions about debt and deficits. The only person for whom I enthusiastically voted.

        • HowNow says:

          It’s very amusing that guys like Perot (Musk and Peter Theil) have made their fortunes through government contracts, govt. subsidies, and government creations (the internet for Theil and Musk) yet are pro free-market and/or Libertarians.

          But Libertarians can be as deceitful as imaginable and still be perfectly aligned with their values: their only value is selfish self-interest. There’s nothing else to it. “You pay for roads, police, military, education. I pay for as little as I can get away with. Gee, the government is the problem! Now, if I can just find another big tech idea to get subsidized…”

          BS on a stick.

      • Natron says:

        The United States is a Corporatocracy unfortunately, not a Republic. Citizens United saw to that.

        • NBay says:

          Money as “free speech”. Plus many other sources of “dark money”.
          At lower levels of gov’t it’s just called “taking a bribe”, and sometimes it is actually punished with real jail time!
          Think the difference is those law firms with skyscraper headquarters.
          “Law” is just another commodity.

      • TheAltonRoute says:

        Is there a constituency for hard-money people? Only a few cranks like Ron Paul talk about that stuff.

    • SWE Josh says:

      The Debt Ceiling is a farce. The budget process is when the conversations around future spending should happen.

      • Venkarel says:

        When is the last time a full congressional budget was negotiated and passed? We have bee operating under continuing resolutions and an omnibus budget since 2006.

      • gametv says:

        SWE Josh – No. The debt ceiling mechanism was created as a way to force politicians to admit that they are vastly increasing our debt. It is actually the most truthful part of the process.

        The budget process has been dysfunctional for a long time.

        Politicians as a group have zero ability to say NO to special interest groups who want a hand-out, whether those special interests are individuals or corporations.

        The big problem with government is that there is no mechanism to evaluate whether programs and departments are actually delivering value. In the private sector, if a company does not deliver some type of value, customers dry up and they go out of business. What we really need is a law to be passed that forces politicians to complete a zero base budget every 2 years. This would force all expenses to be justified as necessary and anything that could be cut would be cut. Would it be perfect? Of course not. But it would force alot of departments to start to justify their existence.

        If you come to the Wolf Street message board and read about the out of control spending and fiscal stimulus that are distorting every financial market, how can you still call any attempt to reverse this trend a farce?

        • NBay says:

          That only applies to very small private businesses, like I worked for most all my life, but are now long gone. If they have customers the bigger corps want, then they are GONE.

          Hard to imagine I dated the bookkeeper or the office manager while just being another “industrial shitworker”.

  14. Mike R. says:

    This time around is going to be different. There are some new kids on the block that are not going to approve the new debt ceiling without some serious considerations for spending restraint.

    And speaking of the guilty party (parties); well its all of us, knowingly or unknowingly. America’s entire economy is bullshit. The government is now most of the economy and what remains is mostly a joke. We have survived (even thrived) in this fake wealth pretty much on the backs of the rest of the globe. Funny thing is, the rest of globe has pretty much figured it out. l

    Better get ready for a very hard reset; games almost up.

    • Mike Smith says:

      The new kids will just play the same old game and keep the overpaid useless management and speed up the line pushing out 87 processed chickens an hour instead of 75. Maybe a few middle men will look for new work. But the weather is changing.

      • NBay says:

        And the laid off guys on the chicken line might go apply at a Smash and Grab company. They seem pretty well managed, to me, and likely pay very well. PT wages probably way better than 40hr on the chicken line.

    • MM says:

      “This time around is going to be different.”

      I really want this to be true, but history has consistently proven otherwise.

    • MattF says:

      I think House leadership may still be mad about the last minute CR which undercut their election victory. They may be willing to demand different concessions than previous Congresses.

  15. james wordsworth says:

    “Reagan proved deficits don’t matter.”

    Dick Cheney

    That about sums it up!

    • Mike R. says:

      Reagan promoted some of the worst policies for this country. He was a simpleton thinker and pretty lousy actor as well.

      • blank says:

        Hey Mike, did you want to express you political preferences?

      • Jon says:

        Many people, including so-called smart people, forget that Congress is actually in charge of the budget. And Congress was run by Democrats throughout the Reagan Administration.

        • bemused says:

          I remember Reagan submitting budgets to Congress that were — with much fanfare — immediately by labelled as dead-on-arrival.

        • Swamp Creature says:


          “I remember Reagan submitting budgets to Congress that were — with much fanfare — immediately by labelled as dead-on-arrival.”

          That’s a lot better than JB’s budgets which were “DEAD BEFORE ARRIVAL”. Or better yet DEAD BEFORE THEY WERE EVEN WRITTEN!

        • bemused says:

          Oh, I totally agree. I was just referring to all those who talk about the deficit exploding after the Reagan tax cuts. Spending was supposed to be reduced at the same time. His budgets tried, but they were ignored. Gleefully.

        • NBay says:

          Who did the Corps and plutocrats tell him to pick as his Treasury Secretary? I completely forgot…..getting old, senile?
          Nah. Didn’t have a radio or TV then and lived in a bread van. Maybe I never knew?

      • VintageVNvet says:

        AGREE, like totally MR:
        As an always NPA voter, I considered voting for ray gun instead of Brown the elder in 1968,,, but only until he, ray gun, ordered the helicopters to spray tear gas over the entire ”southside” of Berzerkeley and I was beaten by the 5 cops who came up to the top of my apt bldg where I was eating due to my apt full of that gas/remnants…
        IMHO, ray gun was a total actor from start as guvanator of CA until his last breath; before that, he was a RAT, far damn shore,, but that was covered up for many many years.
        Surely Nancy covered for him during all that time, as she was clearly the brains of that duo,,,
        kinda like the current situation, eh???
        They ALL, IMHO,,, at least since JFK who clearly did not need the various and sundry BRIBEs,, AKA ”campaign contributions” have been CROOKs lining their pockets by exploiting the ”dumbing down” of USA voters through the extensive propaganda machine, AKA ”Education system” that has been active since the leading commie theorists realized they, the commies, could not beat USA in any kind of war/physical confrontation, and thus began the incredible effort to make the ”ROT WITHIN” do the job over decades…
        SO far,,, that effort is working very well, but sooner AND later, WE the PEEDONs will understand what has and is happening,,, and ”corrections” will happen…

        • NBay says:

          He sure hated us “dirty hippies”…..and had some great insults that I forgot.

    • Old school says:

      If you have watched any of Lacy Hunt videos there might have been some truth to that at the time as debt to gdp was low.

      His theory is we have hit debt to gdp level where each dollar of new debt actually harms GDP growth and we will follow Japan’s path into trouble getting off of zero bound unless current monetary system changes.

  16. John Apostolatos says:

    “If they don’t agree on a deal, the US government will default on its obligations, hopefully starting with Congressional salaries, benefits, pension payments, and toilet paper.”

    The big question is who will be buying our debt this time around.
    – China and Japan?
    – OPEC?
    – Or the Fed as usual?

    Too much is going on politically this time around, and the Saudis and other OPEC countries are removing their support it seems.

    Just a week ago, China and Brazil agreed to bypass dollars and settle trade in their own currencies. India is paying for Russian energy in Rubles. China brokered a peace deal between Saudis and Iranians to reduce US influence in the region, and help Saudis align more with China and join the BRICS.

    Perhaps the debt ceiling will be raised, but the flood of treasuries will be sold at much higher rates this time.

    • Mendocino Coast says:

      Exactly Right BRICS > and this is a serious matter not good for the dollar <
      I hope Wolf can comment on this as I would like to get his take on the matter ? he's the expert

  17. fred flintstone says:

    So……I’am curious
    If the federal debt is inflated by a cpi of 9%… last year…..that is roughly……2.7 trillion of debt that went up in smoke……and since the debt interest payments are included in the annual deficit figures the gov uses……we ran a surplus last year in real terms!
    Not to mention….the inflation on all government assets such as office buildings, oil land, federal land etc etc
    So the government is getting richer and richer every year!
    The problem is if the crooks ( I mean congress) keep this up the rest of us will be broke.
    Do I have something goofed up?….or was Cheney being serious.

    • Wolf Richter says:

      No, we didn’t run a “surplus” in real terms. But the purchasing power of the debt got eaten up faster than new debt was added, and tax receipts went up due to inflation, and so the burden of the debt declined. Inflation has that effect.

      Higher interest rates and higher inflation is what we have, and what we will have, and it will eat up some of the burden of this debt, and it will eat up the purchasing power of assets, and it’s pretty rough on the economy.

      • fred flintstone says:

        Thanks! Everyday on this earth I’am still learning.

        • QQQBall says:

          @Fred Flintstone – “We ran a surplus!” Dude, you should run for office or be appointed WH Budget Director. :)

  18. exiter says:

    Thanks Halibut for speaking truth You have pointed to an “Achilles Heel” of our gamed system of government.

    Who understands the difference between Democracy and Republic?

    To wit: The USA became a Democracy …

    In 1776? When slaves became three-fifths of a person?Maybe 1850s when “our” slaves were emancipated? Maybe 1920 when all women got the right to vote?

    When official “electors” were cancelled ? Oh, they were not cancelled and they still have the exclusive right to choose “our” President?

    The public does not select the electors? The public does not even know who are the electors or how they are selected? And it’s true that an official elector must vote for a particular candidate for President but there is no penalty if an elector votes for anyone else except a small fine?

    How could this not be a deliberate education failure?

    • Anon1970 says:

      Don’t confuse the Declaration of Independence (1776) with the Constitution (1787). It is in the latter document that slaves are counted as 3/5 of a person. The slaves were not emancipated until 1863. You are lucky that you did not have to take a civics test before you registered to vote. My guess is that you would not have passed it, at least not on the first try.

  19. Beardawg says:

    It’s like a Shakespeare play – you already know it by heart – then it is acted out and everyone still applauds – because the “acting” was good.

  20. drifterprof says:

    Unfortunately, a government totally gridlocked due to culture war, and partisan extremism, somehow does not become gridlocked in excessive spending money.

    The resulting lack of pragmatism and lack of productive government investment in society is collateral damage that politicians and corporate media do not find profitable to address.

    Somehow the excessive spending keeps blowing out the wazoo, while the majority of hardworking citizens keep taking it up the wazoo.

  21. JimW says:

    In the highly unlikely event of a true impasse on the debt ceiling, who gets paid first out of available funds? Holders of Treasury debt should get paid first as per terms of issuance (I think) but that simply wouldn’t happen with the Democrats in control. If a default actually occurred it might begin the unraveling of the dollar as the reserve currency.

    • Wolf Richter says:

      This will not happen, but if it happens, it would hit regular outlays (paying bills and salaries), not interest payments and refinancing debt.

    • HowNow says:

      Jim, the Reagan administration started this dumpster fire in earnest: dramatic increase in government spending with a massive tax cut for the wealthy. He referred to it as “trickle-down economics”.
      And, if you haven’t noticed, the mad hatters (GOP) are now running the circus, not the Dems.
      But don’t let reality interfere with your thinking. Stay blissful. Full of bliss. Facts do not matter when it comes to opinion.

      • Publius says:

        Both parties are complicit, one mostly on the expenditure side and the other mostly on the revenue side. And I wouldn’t characterize the side holding 1 chamber – while the other side hold 1 chamber plus the presidency – as “running” the circus. Plenty of circus clowns on both sides.

  22. polistra says:

    As always the graphs tell the story.

    Anyone who still holds delusions about “parties” and “democracy” needs to read Parkinson.

    Spending goes up. That’s all.

    If spending ever stopped increasing, bureaucracies would have to stop increasing their power and workforce, which is UNTHINKABLE.

  23. Jos Oskam says:

    Announcing a new streaming video series:
    “Game of Debts”
    after a story by W. Richter.

  24. Michael Engel says:

    1) If congress cannot get along about the debt ceiling the Fed will fill
    TGA. No default.
    2) Most 30Y mortgages are between 2.5% and 4.5%. It means that most
    houses were bought long time ago when prices were lower providing enough cushion.
    3) Most mortgages are sold to Fanny. The banks collect the money and send it to Fanny.
    4) Held to maturity/ available for sale need a lower Dow. Lower Dow lower 10Y.
    5) The rich financed themselves – avoiding taxes – by borrowing at 3%/4%
    using stocks option as collateral. High tech uppers bought $1M-$5M houses using stocks options as collateral. Both mortgages and collateral are underwater. The banks will squeezed the uppers to fill the gap, or else.
    6) US gov real debt : $32T x 1Y x (-)0.0333 ==> down $1T.
    7) Within a year RRP jumped from zero to over $2T, while FFR were lower.
    Thereafter within a year JP raised rates to 5% while RRP stayed put. Squeezing liquidity was the Fed #1 priority. The Fed was not behind the curve.

  25. Joe says:

    I don’t think it is generally appreciated here that dollars are at present debt instruments. There is always more owed than there are dollars in existence. Think about the implications of that. Go look at Mike Maloney’s Hidden Secrets of Money video number 4: the Fed creates dollars out of nothing as interest bearing debt but most dollars are created as interest bearing debt via fractional reserve bank lending.

  26. Kenny Logouts says:

    The use of extraordinary, when the action is merely ordinary.

    Ordinary measures.

    Can we plot house prices vs national debt? Does it look broadly flat?

    I don’t think the number is so offensive, but it does highlight the level of actual inflation which is very offensive.

  27. Michael Engel says:

    1) GDP will rise due to higher oil inventory. OPEC is cutting production to save themselves. China gang together with frontier nations to feed 1.5B people and keep them warm day and night.
    2) MCD is laying off, because global demand is falling.
    3) Banks squeezed lending. Banks are the biggest source of money supply in Europe. In 2020/21 banks lending reached a new all time high : Mortgages, PPP loans, EIDS loans, shingle mums loans, before suddenly it stopped cold.
    4) US banks might demand higher monthly mortgages payments, legally they can, to enslave the middle class, or else.
    5) “Experts” predict a severe recession in US and Europe. US10Y is the lowest rate in the yield curve. The bank’s squeezing, Fed trimming. Recession is baked in.
    6) The Fed might food TGA to save themselves and the gov. It will stop the money supply bleeding.

  28. Franz Beckenbauer says:

    You may not have noticed, but what happens when, say, Joe Sixpack decides 0.2% interest on his bank deposit are too measly (and his wife jane doe agrees) and he buys some treasury notes yielding 4% is the following:

    – joe gets some halfway decent interest on his Federal Reserve notes

    – Jane probably thinks about these shoes she saw on display the other day

    – the bank’s reserve account at the Fed goes down – which means Joe is actually doing QT !

    – the TGA goes up – which is pretty neat if you cannot take on new debt.

    All of this is of course purely coincidental. No politician would plan or orchestrate something like that.

    They’re just too honest.

    • Wolf Richter says:

      1. paragraph is OK.

      2. paragraph is Nonsense. Treasuries are NOT Federal Reserve Notes. Joe is getting interest on Treasuries. Before then he had his cash in the bank = deposits, and he was getting 0.2% on his deposit. Federal Reserve Notes are paper dollars, something entirely different.

      3. paragraph is OK

      4. paragraph, part A. not necessarily. It’s up to the bank where it gets the money to pay Joe when he withdraws his money. It likely has some “cash on hand” for this purpose. There are $17 trillion in total deposits, and only $3 trillion of them are reserves at the Fed.

      4. paragraph, part B. LOL. Joe is not doing QT. The reserve account is a liability on the Fed’s books, not an asset. QT = assets going down. Liabilities will go down as a RESULT of assets going down, but it may not be reserves, it may be any of the other liabilities that go down, but none of this has anything to do with Joe buying shoes, that’s just ridiculous.

      5. nonsense. The TGA does not go up if Joe buys Treasuries. The TGA goes up when the government issues new Treasuries, and it doesn’t matter who buys them, whether Joe buys them or I buy them makes no difference. Someone will always buy them.
      As I pointed out in the article, the government’s Treasury auctions continue, and I just bought some at auction, no problem.

      • Michael Engel says:

        The Fed is an independent bank. It can click credit to TGA, to the gov account in the Fed, at zero rates, rd trip, or $100M to WolfStreet.

  29. Mojer says:

    Wolf, If the debt increases without end then inflation will also increase without end and to this we add that many countries are starting to trade outside the dollar don’t you think that the solution all found or perhaps desired is to let us enter the virtual currency?

    In this way it doesn’t matter the zeros that can more easily follow the inflation.

    • Wolf Richter says:

      All currencies are already “virtual.” They’re debits and credits transmitted via electrons.

      The paper dollars in your pocket are not virtual, but they’re officially Federal Reserve Notes, meaning a piece of paper documenting that you borrowed $x in virtual currency from the Fed.

      That’s what fiat is all about.

    • Kernburn says:

      I struggle so hard to understand the logic behind your statement. Crypto has become exactly like the heavens gate cult. The only question is…where will you be when it finally dies?

  30. joe2 says:

    “If they don’t agree on a deal, the US government will default on its obligations, hopefully starting with Congressional salaries, benefits, pension payments, and toilet paper.”

    Careful, sounds like you are advocating interference in the lawful conduct of congressional creature business. (note: how I carefully kept it gender neutral)

    BTW, the last guy who posted a humorous meme on the internet got 10 years in prison.

  31. Brewski says:

    The Fed and the treasury (fed by congress’ spending) are completely out of control.

    This will end badly. When? Nobody knows, but it is looking to be closer every day.

  32. Xaver says:

    So the Government is allowed to embezzle funds. No wonder it’s hard for others to find an ethical yardstick.

  33. Maxo2023 says:

    Wolf: Does any of this dog-and-pony show even matter? I mean it’s all relative in the end. Debt goes up, debt ceiling gets raised, and then inflation follows, it all gets re-rated back down to the same thing in the end, just that each dollar is worth less. Then we all demand higher interest rates and higher salaries and end up in the same situation. Only if you have no pricing power or no ability to demand higher payments are you really affected.

    • Wolf Richter says:

      “Does any of this dog-and-pony show even matter?”

      Inflation matters. And higher interest rates matter. And that’s what we’ve got thanks to this dog-and-pony show.

  34. Beachwalker says:


    How about cooking up a chart that tracks the correlation between the growth of the national debt and the growth of the wealth of the top 1%?

    • VintageVNvet says:

      Good one Bw, and I would only add the request for Wolf to also add the correlation between the national debt and the wealth of ALL the politicians at every level, but especially the federales.
      IMO, WE the PEEDONs will not gain much if any traction toward a fair and equitable balance until ALL the benefits of the FEDERAL and other GUV MINT folks, no matter if elected or appointed,,, are in the SAME SYSTEM as ALL of WE the PEEDONs…
      Until then, WE are clearly NOT in any kind of democracy or even a so called representative republic.

  35. Neel Kash & Kari says:

    Don’t worry folks, it’s all under control. Yield curve control.

  36. Desert Dweller says:

    As Wolf points out, normally the debt ceiling farce is settled at the last moment after much drama, grandstanding, and lying to the public. With that said, this time may be different. The Freedom Caucus element of the Republic Party is comprised of irrational ideologues who are committed to reducing the size of government. MTG, one of its outspoken members, has on numerous occasions has called for not increasing the debt ceiling and shutting down the Federal Govt. Going all the way back to Grover Norquist, the ultra far right element of the GOP has called for shrinking the Fed Govt so that is can be drowned in a bathtub. Accordingly, I would not bet the farm on the Freedom Caucus (Freedumb Caucus?) acting rationally since this is their best chance since the 1990s to fulfill their dream.

  37. gametv says:

    There is one part of this article that I somewhat disagree with. The implication that marketable securities are generally not impacted by the debt ceiling. If you look back at the last time the debt ceiling had to be raised, you can see two periods where the marketable debt went sideways and a spike in the middle, with a big surge afterwards. That spike in the middle was a temporary raising of the debt limit and then afterwards the trajectory of the debt raised does through the roof for a while. If you compare that time period to interest rates, you will see interest rates bottomed almost exactly when the debt ceiling was raised and took off afterwards.

    So even though the Treasury uses these extraordinary measures, the amount of incremental new marketable bond issuance does come to roughly zero (just replacing maturing Treasuries) in the months leading up to the debt ceiling. We are now 3-4 months away and so we are now at that point where the new debt issuance will effectively be zero for the next months.

    Which is starving markets of incremental new issuance. Which is why long term yields, which the Fed does not directly control are down.

    So look for yields on long term debt to once again rise dramatically after this debt ceiling is raised.

    Furthermore, I think that the regional banks are getting a breather here to protect themselves against losses on bond portfolios coming from higher long term interest rates (probably with derivative contracts). But how much can they protect themselves if risk free rates move up to 5% and then depositors require them to pay much higher interest, or they move their cash?

    One question I have is what happens to bond prices and yields if the debt ceiling does not get raised immediately and we actually go into technical default for a short period of time? Do investors sell bonds because of there now being default risk premium, or do they all sell equities due to a higher risk environment and pump money into the safest assets from a traditional risk management standpoint (Treasuries), on the belief that the government will solve the issue?

  38. Michael Engel says:

    1) China will dominate the world in mid 2030’s.
    2) China gang together with frontier and BRIC nations to feed their 1.4B
    population and keep them warm day and night.
    3) China consume more energy and commodities than any other nation. China is a large dinosaur.
    4) China print money to keep it’s clogged silk road going. Number #1 beneficiary : Argentina, #2 : Pakistan, #3 : Egypt.
    5) China is a large scary Dragon, spitting fire, showing it’s claws. The last thing they want is a war with us, because China might become an extinct Dino.

  39. Swamp Creature says:

    There is going to be a buyer’s strike in the very near future. The 75 million 2020 T voters are not happy campers with all the crap that is going on in NYC and Washington DC. I can’t see them putting their hard earned savings into the stock market or any other long term investments.

    Unhappy people don’t make good consumers. The only places that may do well are Sports Bars and golf courses. They are already packed.

  40. Swamp Creature says:

    Speaking of packed golf courses Anthony has to get up at 3AM and spend an hour on speed dial to book his tee time.

  41. Greg D. Costeens says:

    For the most part, americans like many other populations are historically ignorant, socially delusional, economically illiterate and politically gullible. As such they are incapable of constructive self-government operating in a representative democracy.

    • Anon1970 says:

      Very true. But we have to live with the population that we have, not the population we wish we had.

  42. NARmageddon says:

    “Combined, non-marketable Treasury securities and marketable Treasury securities make up the $31.4 trillion in the gross national debt.”


    National debt = marketablesecurities + nonmarketablesecurities
    = externaldebt + intragovernmentaldebt

    I’m going to venture a guess that the famed “place social security funds in a lockbox” phrase of the year 2000 election (Al Gore campaign slogan) would be the equivalent of having nonmarketablesecurities=0. Correct or not?

  43. Bobber says:

    The debt ceiling debate is overwhelmingly a display of political grandstanding, but I think there is a 1% possibility they might not raise the ceiling, which would force spending cuts.

    There seems to be a 5% chance the ceiling will be raised after the markets drop 10-20% in response to inaction.

    These debt ceiling debates do have some risks.

    It’s like two kids playing chicken on their bikes. Sometimes, they crash head on, even though neither side intended to do it.

  44. RickV says:

    “Periodically, we get to watch our favorite farce, played out in Washington DC in front of a bedazzled world….” You are too kind. Definition of insanity: Doing the same thing over and over again and expecting a different result. Albert Einstein (maybe)

  45. Ed C says:

    Everyone wants free stuff. Tuition loan forgiveness was the proverbial pony that every kid-at-heart was wishing for. Forget that it was illegal, unconstitutional and knowingly impossible for the president to even offer it. Who could resist that? Is this the fatal flaw of democracy? Politicians pander to voters. There’s no fiscal responsibility at all, no shared sacrifice. How many years do we have left before complete collapse? The fall of the Roman empire comes to mind.

  46. nick says:

    What is happening with the 10 years and 2 years yields?

  47. Swamp Creature says:

    There are some eerie parallels and contrasts between the current situation with the economy and the politics today and the period Jan to August 1973. Back then

    1. President Nixon was under fire for the Watergate scandal. It looked like his administration was doomed, and to any informed person at the time it was only a matter of time before he had to resign.

    2. Inflation was taking off along with interest rates.

    3. Residential Real Estate was booming, at least here in Washington, D.C.

    4. Markets didn’t like any of this and it plunged 40%.

    Things are worse now by far than in 1973.

    Back then we didn’t have the level of debt that we have now. Nixon was still able to conduct foreign policy effectively, and he a good cabinet to back him up on domestic and foreign affaires. Arthur Burns, the Fed Chief had enabled Nixon to win a landslide election victory with his timely manipulation of interest rates and monetary policy.

    None of these positive factors are present here today. We have total incompetence in nearly every branch of government including the Fed. Nothing good can or will happen as a result.

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