For weeks we’ve been hearing that either Congress raises the debt ceiling or the US faces a catastrophic default — potentially as soon as this week, Yellen said. Now an 11th-hour deal between Biden and the Republicans (which still needs to be rubber-stamped by Congress) has averted default in the nick of time — or so we are told. In fact, as I write in UnHerd, the whole debt ceiling drama is little more than stagecraft. The notion that the US government can “run out of money” and/or default is simply ridiculous. As the issuer of the currency, the US government can neither run out of money nor become insolvent on its debt. In other words, these recurrent “fiscal crises” are entirely of the US’s own making, stemming as they are from a rule — the debt ceiling — that it has imposed upon itself. Indeed, the US is only one of two countries in the world with a rule of this kind. So does the existence of the debt ceiling mean that the risk of default was real? No. As I explain in the article, there were/are several legal and technical alternatives to a default, even in the absence of a debt ceiling raise — indeed, the idea that the US government would have allowed itself to auto-default due to an archaic century-old law was never a serious proposition. So why all the scaremongering? Ultimately, it’s hard not to conclude that the whole purpose of the debt ceiling is precisely to allow for the engineering of artificial fiscal crises that allow the two parties to engage in a bit of cosplaying only to ultimately reach a budgetary “compromise” which always which boils down to austerity for the working classes and trillions for the corporate elites. Read the article here.
Thomas Fazi 