Starting Monday, the Treasury Department will begin taking emergency cash conservation measures to avoid breaking the federal borrowing limit after a two-year debt ceiling suspension expires in late July. Economists say these “extraordinary measures” will allow the Treasury to pay government bills without new floating debt for two to three months. After that, Congress will have to raise or suspend the debt limit or risk the United States defaulting on its obligations. In other news, we got a first look at second-quarter growth figures last week. While the economy grew slower than expected, experts say that gross domestic product eclipsed pre-pandemic levels.

 

CNBC/Thomas Franck
Treasury Dept to invoke ‘extraordinary measures’ as Congress misses debt-ceiling deadline

The Treasury Department will begin conducting emergency cash-conservation steps on Monday to avoid busting the federal borrowing limit after a two-year suspension of the debt ceiling expired at the end of July.

Economists say those so-called extraordinary measures will allow Treasury to pay off the government’s bills without floating new debt for two to three months. After that, Congress will need to either raise or suspend the borrowing limit or risk the U.S. defaulting on its obligations.

The limit, a facet of American politics for over a century, prevents the Treasury from issuing new bonds to fund government activities once a certain debt level is reached. That level reached $22 trillion in August 2019 and was suspended until Saturday.

The new debt limit will include Washington’s additional borrowing since summer 2019. The Congressional Budget Office estimated in July that the new cap will likely come in just north of $28.5 trillion.

Though the federal government has never defaulted, economists say such an event would have disastrous effects on the U.S. economy by spiking interest rates.

“The government needs to have funds, for example, to pay interest on its debt, and if it were to stop paying interest that could be extremely unsettling for financial markets,” Harvard University economics professor Karen Dynan told CNBC on Thursday.

Continue reading, here.

 

Yahoo Finance/Myles Udland
Why an atypical recession has seen a typical recovery

The first look at second-quarter growth figures out last week had some good news and bad news.

The bad news was that the economy grew slower than expected in the second quarter.

The good news was that gross domestic product (GDP) — for the first time — eclipsed pre-pandemic levels.

But in a note to clients published Friday, Oxford Economics’ senior economist Bob Schwartz argued that this rebound to pre-COVID levels isn’t exactly the flattering economic data point that it might seem at first blush.

“The rapid first-half growth lifted the level of GDP above its pre-COVID level,” Schwartz wrote.

“That, in turn, underscored the attention-getting headlines that the economy has recovered all of its pandemic-related output losses, leading some to laud this as a V-shaped recovery. As important as that development may seem, we have to point out that there is nothing special about how fast the economy returned to its previous peak,” the economist added.

Keep reading, here.

 

WSJ via Fox Business/Carol Ryan
Hard liquor can take the edge off inflation

Liquor companies are taking inflation in their stride. A push into premium brands, coupled with the fact that more drinkers are switching to spirits from beer in key markets, should help maintain their edge.

Johnnie Walker distiller Diageo, Budweiser brewer Anheuser-Busch InBev and Swiss food giant Nestlé beat analysts’ sales expectations across the board in results reported Thursday. But the ability of these big consumer-goods companies to protect profit margins from cost inflation has been mixed.

Liquor specialists seem to be performing the best. Diageo expects to grow its margins in the financial year through next June, despite higher costs for commodities, shipping and packaging. Analysts also increased profit expectations for Italian competitor Davide Campari-Milano, the maker of brands such as Aperol and Grand Marnier, after it released strong results earlier this week.

You can read the full story, here.

 

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