US Debt Ceiling Crisis, How World Economy Takes A Hit; Great economic crisis in front of the United States! Gautam Adani’s cash balance less than his assets, June 1 deadline
Now a big crisis is facing the country and now the effect of this crisis is starting to be seen in the country. For the first time on Tuesday, the US stock market continued to move in the wake of the crisis, losing $400 billion in just four hours. In addition, US Treasury Secretary Janet Yellen warned that the country will default on June 1 if the financial crisis is not resolved. As the deadline approaches, the market is falling and borrowing costs are rising.
America’s lead in borrowing
Meanwhile, the US is considered to have the highest borrowing capacity. In such a situation, if the country defaults this year, its image will suffer. Note that America is considered the best place in the world to invest. And the US government is always in demand for debt, keeping interest rates low and the dollar becoming the world’s reserve currency. US government bonds are considered the most attractive in the world. So the US government spends heavily on everything from defense (military) to schools, roads, infrastructure, technology and science.
In such a case, if the US defaults on the loan repayments, all outstanding series of bonds will be affected. These include bonds issued in global capital markets, government-to-government loans, foreign currency debt agreements with commercial banks and institutional lenders.
If the US defaults…
If the US defaults, there will be serious consequences. White House economists say it would kill 8.3 million jobs in the country, wipe out half the stock market, drop GDP by 6.1% and raise the unemployment rate by 5%. Currently, interest rates in the country have reached the highest level since 2006, the banking crisis is steadily increasing and the dollar is also weakening. So there is a 65% chance of recession in the country. If the US defaults in such a situation, it is sure to get stuck in the depths of recession and its effects can be seen all over the world.
What is Debt Limit?
The debt ceiling is the limit that the US federal government can borrow. The limit has been raised 78 times since 1960, the last time it was raised to $31.4 trillion in December 2021, but now it has gone beyond this limit. According to a blog post by the White House Council of Economic Advisers, if the debt ceiling is not raised, the country will face a major crisis and the economy will suffer huge losses. The current boom in job growth will derail. Millions of jobs will be lost.