The clock is ticking on the U.S. debt limit, which was already technically reached on 19 January 2023. The U.S. Treasury currently estimates that emergency measures which are expected to extend the most severe impacts of the debt limit by several months, will be exhausted in June 2023. The economic risks are potentially high.
Of course, many expect politicians to reach an agreement to raise the debt limit prior to June, but what if they don’t? Financial markets are showing some concern, , have reached multi-year highs, though haven’t yet approached the levels we saw in 2011, when the U.S. potentially came within a few days of default and S&P downgraded the U.S. government’s credit rating.If political negotiations do stall, then it’s possible the Treasury is able to do more to push out the deadline using even more extreme emergency measures, or using speculative tactics such as minting very high value coins.
Still, it’s important to note that the U.S. debt limit has already been reached, meaning we are already on borrowed time. On current estimates by June, the Treasury would be forced to make increasingly difficult and ultimately unsustainable trade-offs. At a certain point, measures to avoid a debt default might push the U.S. into recession, if for example, social security payments or paychecks to government employees were delayed.
, a common recession signal, so further issues with the debt limit may disrupt the U.S. economy at a precarious time.The credibility of U.S. government debt would also be impacted. Currently, the U.S. government enjoys relatively low borrowing costs compared to other government borrowers. If the forecasted June limit is reached, then similar to 2011 when U.S. debt was downgraded, the current faith in U.S. government debt in financial markets, may be questioned.
well hey we had to force puppet it eventually we had to finish what we started. collateral damage irregardless we have our integrity
Nothing fun. But in the bright side Rolex’s should be cheap again.