The Federal Deposit Insurance Corp. (FDIC) pulled $40 billion from the Treasury General Account on Friday of the United States to provide support in the drama surrounding Silicon Valley Bank. This withdrawal from the Treasury General Account, the reserve fund of the US government, was many times larger than previous withdrawals. Because of this recording, the jar slowly emptied and that can sometimes cause problems.
$208 billion left
After last Friday’s FDIC draws, there is still about $208 billion in the U.S. government’s reserve pool. Compared to the balance of a week ago, that is about $ 100 billion less.
“The big news was a $40 billion drawdown by the FDIC, which brought the Treasury General Account cash balance well below our estimates,” Wrightson ICAP analyst said on Tuesday.
If the Treasury Department fails to replace those funds, it could increase the risk of reaching the debt ceiling more quickly. “The so-called date-X could come as early as June, instead of July,” the Wrightson analyst continues.
Date-X is about the far-reaching measures that the US government is taking to pay its federal obligations, while Congress and the White House are in conflict over whether or not to raise the debt ceiling of $ 31.4 trillion.
The US debt ceiling
You wouldn’t say it, but the US government does have a debt ceiling. After reaching this ceiling, they are in principle not allowed to take on any more debts, which could mean that the country goes bankrupt. In practice, this will not happen so quickly, but in politics there is often considerable discussion before raising the debt ceiling.
In this case, Congress is dominated by Republicans, allowing them to demand all sorts of things from the Democratic government that is currently in place. For example, that they will cut their spending considerably and that they will make other concessions before the debt ceiling is raised.
That way the Republicans can hurt the reputation of the Democrats, because cutting spending never has a positive effect on the next election. The Republicans are currently in a strong position in that regard.
Eventually the debt ceiling will be raised and that is good for Bitcoin. The more debt creation there is in the current financial system, the more potential Bitcoin has to grow and convince people that fiat money is not a safe deposit.