If Democrats and Republicans can’t agree on raising the debt ceiling, the US government risks being locked down. “It is conceivable that the United States will then be unable to meet the debt payments,” says BNR in-house economist Han de Jong. ‘Something like this creates great uncertainty in the financial markets.’
By closing schools and museums, and unpaid teachers and civil servants. This and much more threatens if the US fails to agree on a debt ceiling increase. Democrats and Republicans are diametrically opposed in Washington, and the question is whether either party will budge.
“US government bonds are seen as the safest investment you can have in the world”
If the ceiling is reached anyway, the government has no choice but to shut down large parts of the public administration. “Many people then lose their income,” says de Jong. “This creates a great deal of uncertainty.”
The impact of the United States on the world is enormous
But this is also possible outside the American borders stop reverberate, fears the economist. It is conceivable that the United States will default on debt payments. This would mean that they default and this has an impact on the creditworthiness of the country.’
In the US, the impact is even greater, de Jong says, because US government bonds are seen as the safest investment anyone can have in the world. ‘Many prices of other financial products in other markets are based on it. If this basis is lost, enormous uncertainty will arise.’
Blackmail
The debt ceiling in the US works very differently than we are used to here, says de Jong. “It is determined by law how high the national debt can be. But that debt keeps growing and threatens to hit that ceiling again and again.’
To avoid that, Congress has to raise the debt ceiling a little each time. And that is where the problem lies now. Republicans have a majority in the House of Representatives. They blackmail the president. They want to raise the debt ceiling, but only if Biden makes significant cuts.
Source: BNR
Sharon Rock is an author and journalist who writes for 24 News Globe. She has a passion for learning about different cultures and understanding the complexities of the world. With a talent for explaining complex global issues in an accessible and engaging way, Sharon has become a respected voice in the field of world news journalism.
