Why the Debt Ceiling Raise does not mean America is Out of the Woods

After the latest raising of the US’s debt ceiling (Now standing at over $31 trillion according to the official, published figure though some believe it to be much higher.), it seems that the federal government has spared itself some trouble now that it avoided default yet again, as well as a government shutdown.

So, everything is hunky dory, right?

Well, the debt ceiling will become an issue again on January 2025 since the bill passed suspends the limit of borrowing until then. Meaning that from the passing of the bill to January 2025, the government will be able to borrow as much as it needs to fund its welfare programs, military budget, and obligations to its creditors for the interest on some of the accrued debt.

To get this money would require further borrowing which means the national debt would grow bigger and exacerbate the inflation issue from the creation of new money despite the Fed’s attempts to combat it through interest rate hikes.

In the longer term, this may lead to further issues down the road as China, one of the holders of the debt, is developing a closer link with BRICS-affiliated nations and the dollar’s increasing devaluation plays no small part in this.

The government of China and the governments involved in the BRICS initiative are well aware of the precarious situation the world reserve currency exported by the US has found itself in, and it’s a hole that gets deeper whenever the government permits itself to borrow more of the currency backed by little more than faith and the strongest military in the world.

But even that is losing its appeal to not just the ever-daring BRICS, but Saudi Arabia also now that they are expressing interest in trading in currencies besides the dollar for their oil and joined China’s Shanghai Cooperation Organization.

Even America’s southern neighbours are showing intent to break away from its influence now that Mexico and Argentina are considering adding themselves to the BRICS membership (Argentina even applied to the legion of combined emerging economies in the previous year.)

The US has a not to be underestimated competitor to contend with and after the latest debt ceiling raise, it may find that it has accomplished in giving not just BRICS further reason to seek a future without the further devaluing world reserve currency or at least a future without dependence on it. And when this latest permission to further borrow and add to the debt is fully exploited, it will also give reason to the domestic sphere to find alternatives to the devaluing greenback as well.

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