The Federal Reserve won’t sit idle if Congress fails to lift the debt ceiling and the government is unable to pay all its bills, economists said. An emergency plan devised years ago is the likely blueprint.
The Federal Reserve won’t sit idle if Congress fails to lift the debt ceiling and the government is unable to pay all its bills, economists said.In order to understand what the central bank might do, Fed watchers are dusting off their copies of the minutes of a Fed meeting in October 2013, the last wide-ranging discussion of the topic among Fed officials that is publicly available.
What’s puzzling to everyone is that this is a self-inflicted danger. Congress could quickly resolve the issue and raise or suspend the debt limit. Government officials are loath to even mention the plan exists for fear this could increase the risk of politicians causing a default, said Michael Gregory, deputy chief economist at BMO Capital Markets.
“The longer we would go beyond that drop-dead date, the more the stress would build and the more you’d risk seeing increasing pressures in various markets,” Daco said. The idea are not the clever ones, like minting a trillion dollar coin, that have captivated social media.
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