Bill Payments, 14th Amendment, Increasing Interest Rates

Economic News/Policy:

May 21: Yellen sidesteps question on which bills would go unpaid if US defaults on debt

Treasury Secretary Janet Yellen on Sunday sidestepped a question about how the department would pick and choose which of the country's bills would go unpaid if the U.S. defaults on its debt.

Yellen confirmed on NBC's "Meet the Press" that some bills will go unpaid if the debt ceiling isn't raised as soon as June 1, calling the limit a constraint on the country's ability to pay its debts.

"Look, I would say we're focused on raising the debt ceiling and there will be hard choices if that doesn't occur. There can be no acceptable outcomes if the debt ceiling isn't raised, regardless of what decisions we make," Yellen said.

Yellen has warned that the U.S. could default on its debt as soon as June 1, and said on Sunday that the odds of the country making it to June 15 while being able to pay all of the nation's bills are "Quite low."

President Biden is headed home early from an international trip so he can resume in-person negotiations on the debt ceiling with House Speaker Kevin McCarthy.

The White House has called for a clean debt ceiling increase, while House Republicans are pushing for an increase tied to spending cuts.

Biden said on Sunday that he thinks he has the authority to use a clause in the 14th Amendment to unilaterally address the debt ceiling, though Yellen expressed hesitation about the idea.

May 21: Biden says he thinks he has the authority to use the 14th Amendment on the debt ceiling

President Biden on Sunday said he believes he has the authority to use the 14th Amendment to unilaterally address the debt ceiling, but he acknowledged potential legal challenges could still lead the nation to default if he went that route.

"I'm looking at the 14th Amendment as to whether or not we have the authority - I think we have the authority," Biden told reporters at a press conference in Hiroshima, Japan. “The question is, could it be done and invoked in time that it would not be appealed, and as a consequence past the date in question and still default on the debt? That is a question that I think is unresolved.”

Biden added that all four congressional leaders said in a recent White House meeting that they agreed the nation would not default, signaling that he hoped talk of the 14th Amendment would ultimately not be necessary.

The Treasury Department has warned the U.S. could default as early as June 1 if no action is taken to raise the debt ceiling.

The idea hinges on a phrase in the 14th Amendment that says the public debt "Shall not be questioned," which proponents of the idea argue means the president could unilaterally continue to issue debt if Congress does not act.

Biden earlier this month said he had been "Considering" the 14th Amendment as a way to unilaterally work around the debt ceiling but also said it would not be a viable short-term solution.

Treasury Department Secretary Janet Yellen previously warned that using the 14th Amendment could trigger a "Constitutional crisis," calling it "One of the not-good options" if Congress failed to act.

May 19: Powell says credit crunch is doing the work of Fed’s rate hikes

Banks that got spooked by huge failures in their sector earlier this year and tightened lending to protect their margins are picking up where the Federal Reserve may be leaving off when it comes to further interest rate increases.

The private credit crunch resulting from three of the largest bank failures in U.S. history - all of which catered to extremely wealthy customers who were promptly bailed out well above the standard $250,000 insurance limit by the Federal Deposit Insurance Corporation - may be taking the Fed off the hook for more rate hikes, Fed Chair Jerome Powell suggested Friday.

"While financial stability tools helped to calm conditions in the banking sector, developments there are contributing to tighter credit conditions," Powell said.

The Fed's latest rate hike earlier this month put interest rates in the range of 5 percent to 5.25 percent, meeting the bank's latest terminal projection for where rates should end up this year.

Central bankers expect to lower rates to 4.3 percent next year and to 3.1 percent in 2025, as consumer inflation continues to fall from its peak of 9.1 percent in 2022.

The bank failures and response from the financial sector may be hastening the U.S. economy toward a recession, which the Fed has been predicting since March.

Former Federal Reserve Chair Ben Bernanke described the failures and response from the FDIC and the Fed, which extended a special line of credit backstopped by taxpayer money, as following "The standard sequence" from faulty management, a subsequent bank run and a fear of "Contagion."

"We should plan for those bank failures by focusing on strong capital requirements and an effective resolution framework as our best hope for eventually ending our country's bailout culture that privatizes gains while socializing losses," FDIC board member Jonathan McKernan wrote in a statement following the FDIC takeover of First Republic Bank.

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May 23: Star Swarms Reveal a Hidden Beast: NASA’s Hubble Hunts for Black Hole Close to Earth

Gravitational traps in space, black holes, come in different sizes. Or more correctly, different masses, because they are all infinitely small. The first black hole ever discovered, in 1971, weighed in at 21 times our Sun’s mass. It was formed by the explosion and collapse of a star. Examples of a completely different class of black hole were identified in the 1960s-1970s. They weighed in at millions to billions of times our Sun’s mass. Like all supermassive black holes, those monsters dwell in the center of major galaxies.

Astronomers classify black holes into three categories by size: miniature, stellar, and supermassive black holes. Miniature black holes could have a mass smaller than our Sun and supermassive black holes could have a mass equivalent to billions of our Sun. The cores of globular star clusters are hunting grounds for intermediate-mass black holes.

Astronomers using NASA's Hubble Space Telescope have come up with what they say is some of their best evidence yet for the presence of a rare class of "intermediate-sized" black hole that may be lurking in the heart of the closest globular star cluster to Earth, located 6,000 light-years away.

Looking much closer to home, there have been a number of suspected intermediate-mass black holes detected in dense globular star clusters orbiting our Milky Way galaxy.

In 2008, Hubble astronomers announced the suspected presence of an intermediate-mass black hole in the globular cluster Omega Centauri.

If the object isn't a single intermediate-mass black hole, it would require an estimated 40 smaller black holes crammed into a space only one-tenth of a light-year across to produce the observed stellar motions.