Authored by James Rickards via DailyReckoning.com,
The phrase “X-Date” may remind readers of the TV drama The X-Files or the superhero X-Men. It actually refers to the date when the U.S. Treasury goes broke.
The problem arises from the fact that issuing U.S. Treasury debt beyond a certain ceiling requires approval from the U.S. Congress. The amount of outstanding debt today is at the current debt ceiling.
The Treasury is allowed to issue new debt to roll over maturing debt as long as the ceiling is not breached. Since the U.S. is running large budget deficits, the Treasury has to increase the total amount of debt outstanding in order to pay the government’s bills for everything from F-35 fighter jets to food stamps.
Treasury has already hit the debt ceiling but has been able to scrape by with some positive cash flow (due to tax payments around April 15) and some other revenue sources including excise taxes and tariffs.
The Treasury also has a slush fund called the Exchange Stabilization Fund (created with the profits made in 1933–34 when FDR confiscated gold and raised the price from $20.67 per ounce to $35.00 per ounce – one of the great insider trades of all time).
Still, the Exchange Stabilization Fund has been used lately to prop up the FDIC insurance fund that has been depleted by the bailout of Silicon Valley Bank. You get the picture.
Continue reading “Rickards: “Weird Gold Trick” Could End Debt-Ceiling Showdown”
