Good day forex traders and readers.
We last spoke of the US debt ceiling crisis back in 2011 which you can refer to If you are interested in what the US debt ceiling is.
In today’s article I will like to explore the impending 2013 debt crisis of the US. As far as the debt ceiling is concerned, the limit had been reached back in May. In view of that, the US treasury has been implementing extraordinary measures to keep the debt contained however it was reported that no more measures can be taken on October 17. This effectively means that the US government can no longer borrow anymore money come that day unless the US debt ceiling is raised.
We know that the implications from a stall in funding will result in far reaching impact to the economy. For example a lack of fund will delay interest payments on bonds issued by the US government. Such an action will create a loss in confidence towards the US government and financial system. This will have global implications and also increases the interest demanded for future loans sought by the US government due to the perceived additional risk. This will then increase the spending of the US government adding to it’s debt. In the meanwhile, risk aversion may strike the markets too causing riskier assets such as equities to fall in value creating a spiral of financial recede.
It is in the best interest of all that the impasse gets resolved as soon as possible because it was observed previously that the markets often penalize eleventh hour decisions. It was reported that Goldman Sachs economists estimated that should the US government fail to reach a solution, a fiscal pullback equivalent to 9% of the GDP may occur.
Will the US debt ceiling be raised in time or are we going to see the first ever default of the US government? Tell me what you think in the comments section below.