Could the Fed Rescue US From the Debt Ceiling?

The Federal Reserve maybe able to fund the U.S. government if no deal to raise the debt ceiling is reached.

The Fed currently owns about $1.63 trillion of Treasurys. It can sell these through its open market operations . All Fed income that exceeds the Fed’s costs are remitted to the U.S. Treasury Department. Which means that the revenues from selling Treasurys could be used to fund government operations instead of borrowing.

Sales of Treasurys by the Fed would not violate the debt ceiling laws, because the debt has already been issued. It is already counted against the debt ceiling.

more [link to www.cnbc.com]

Will they?

Doubt it unless Congress forces them...

The Federal Reserve ADMITS that Its 12 Banks Are PRIVATE - Not Government - Entities

continue [link to www.washingtonsblog.com]

A Short History of US Credit Defaults

What Will Happen in August of 2011?

Many people are wondering about the possibility of a default by the Treasury on August 3, 2011, when, according to the Treasury's projections, it will no longer be able to meet all expenses without additional borrowing.

In this event, it is unlikely a default will occur. Historically, governments prioritize debt service above all other expenses. If the expansion of funds via debt becomes impossible, the Treasury will cease paying other expenses first, starting with "nonessential" discretionary expenditures, and then move on to mandatory expenditures and entitlements as a last resort.

In extremis, what will happen is that all the losses will be foisted onto the Federal Reserve. The Fed holds something on the order of $1.6 trillion in debt issued by the Treasury of the United States. By having the Federal Reserve purchase blocks of Treasury debt and defaulting on these non-investor-held securities, the United States can postpone a default against real investors essentially forever.

in full [link to mises.org]