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“Weird Gold Trick” Could End Debt Ceiling Showdown
by James Rickards Daily Reckoning
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.