What’s Up? (Jan. 15-21)
The U.S. Hits Its Debt Ceiling
The United States hit its borrowing cap of $31.4 trillion on Thursday, setting the stage for a bitter fiscal fight in Congress over raising the limit. Treasury Secretary Janet L. Yellen said the government would take “extraordinary measures,” at least until early June, to keep paying its bills. Democrats and the White House, as well as forecasters and economists, have warned that the nation risks a financial crisis and other dire economic scenarios if lawmakers do not raise the limit before the Treasury Department exhausts its ability to buy more time. But Republicans have said that they will not raise the borrowing limit again unless President Biden agrees to steep cuts in federal spending.
“Samcoins” and FTX’s Final Days
As the government continues building a case against the founder of the cryptocurrency exchange FTX, Sam Bankman-Fried, more details are emerging about the workings of the exchange. Rivals said that Mr. Bankman-Fried often promoted digital currencies, known as “Samcoins.” Mr. Bankman-Fried was said to use his influence to persuade people to buy large quantities of the coins, inflating their value artificially, to make his crypto trading firm, Alameda Research, look healthier than it really was. (Mr. Bankman-Fried has denied accusations that he tried to manipulate cryptocurrency markets.) Also, documents obtained by The New York Times show that FTX executives voiced concerns over the use of customer funds in the weeks leading up to the collapse of the firm.
More Layoffs in Big Tech
Two of the tech industry’s biggest players announced last week that they would be cutting thousands of jobs. Microsoft said on Wednesday that it would lay off about 10,000 workers, and Alphabet, the parent company of Google, said on Friday that it would lay off 12,000 employees. Across the tech industry, employers are pulling back after several years of frenetic hiring to meet the pandemic-fueled surge in online services. Nearly 200,000 tech workers have lost their jobs since the start of 2022, according to Layoffs.fyi, which tracks job cuts in the sector. Even the industry’s power players have been affected: Apple is the only major firm that has not yet announced significant cuts. Satya Nadella, Microsoft’s chief executive, said at the World Economic Forum meeting in Davos, Switzerland, last week that “quite frankly, we in the tech industry will also have to get efficient.”
Understand the U.S. Debt Ceiling
What is the debt ceiling? The debt ceiling, also called the debt limit, is a cap on the total amount of money that the federal government is authorized to borrow via U.S. Treasury securities, such as bills and savings bonds, to fulfill its financial obligations. Because the United States runs budget deficits, it must borrow huge sums of money to pay its bills.
What’s Next? (Jan. 22-28)
Initial Estimates of Economic Growth
The Bureau of Economic Analysis will release on Thursday initial estimates of economic growth in the United States in the fourth quarter of 2022. The report on gross domestic product is likely to show that economic output, adjusted for inflation, increased at an annual rate of 1.5 percent in the quarter, according to predictions from forecasters. That would represent a slowdown from the rate of 3.2 percent in the third quarter. The Federal Reserve’s campaign to rein in inflation by raising interest rates is taking a toll on the economy, especially the housing market. Although consumer spending has slowed, the economy has shown surprising resilience after contracting in the first half of last year.
Lora Kelley
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