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Treasury Secretary Yellen calls for swift action to raise spending limit and avoid U.S. bond default

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Janet Yellen noted that the country would reach its legal debt limit on January 19, 2023. She warned that “failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability.

Yellen warns of approaching debt limit and urges Congress to act quickly.

On Friday, January 13, 2023, the U.S. Treasury issued a press release featuring a letter written by Janet Yellen, the 78th U.S. Treasury Secretary. The letter is addressed to the House of Representatives and the newly appointed 55th Speaker, Kevin McCarthy (R-CA).

In the letter Janet Yellen warns that the debt limit is approaching and urges Congress to act quickly before the nation’s massive $31.4 trillion borrowing authority is exhausted, in order to avoid default on the nation’s bonds. Although, a temporary solution could be used to avoid a U.S. bond default.

The Secretary of the Treasury insists that the use of a process known as “extraordinary measures“could buy Congress time to increase the borrowing power of the United States. This process, which amounts to transferring money from one account to another to ensure that bills are paid on time, allows the Treasury Department to move money around to prevent the United States from defaulting on its obligations. However, Janet Yellen notes that this can only be done for a limited time.

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The length of time that extraordinary measures can last is subject to considerable uncertainty due to a variety of factors“, Yellen wrote. She added: “Liquidity and extraordinary measures are unlikely to be exhausted before early June.“The Secretary of the Treasury continued:

I respectfully request that the Congress act expeditiously to protect the full faith and credit of the United States.

At a press briefing Friday, White House Press Secretary Karine Jean-Pierre was asked about the approaching debt limit, and she said, “We think that when it comes to the debt limit, it’s been done in a bipartisan way over the years and decades“, Ms. Jean-Pierre told reporters. “And it should be done in a bipartisan way. And it should be done without conditions. That’s important here.

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U.S. stock markets ended Friday in the green, with all four benchmark U.S. stock indexes – the Dow Jones Industrial Average (DJIA), the S&P 500, the Nasdaq Composite and the Russell 2000 – closing higher. In addition, the three most traded precious metals in the world – gold and platinum – closed higher. gold, silver and platinum – have been on the rise lately.

The spot price of gold in New York on Friday was about $1,921.60 per ounce, up 1.26%, and the price of an ounce of silver was about $24.38 at the end of Friday. The global crypto-currency market capitalization was also up 4.1% on Friday. BTC jumping above the $21,000 per unit area. On Saturday, January 14, 2023, the price of bitcoin is holding just below the $21,000 mark.