What Happens if the U.S. Debt Ceiling Is Hit? | WSJ

Congress and the White House have to — yet, again — agree to raise the debt ceiling before the default deadline of June 1, 2023. While both parties disagree on conditions to raising it, they both agree that a default can’t happen.

Why? Because U.S. debt has become the center of gravity for the economy. Bonds issued by the Treasury are considered the safest investment and therefore the “benchmark” for so many pieces of the financial system. A default would throw the U.S. into a recession, according to Moody’s and other economists.

WSJ explains why bonds have become central to the U.S. economy and how a potential default would affect you.

0:00 The debt ceiling debate
1:12 How the U.S. takes out debt
2:26 Why Treasury bonds are the benchmark for investments
3:33 Two default scenarios

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#Debt #DebtCeiling #WSJ

[MarkSlavin]

Two years ago nobody could predict the dollar condition we're witnessing today. The u.s continue to double down on the same mistake that brought the dollar where it's. Therefore, no guarantee that the grass of the dollar would not be faster than it's envisaged

[Greggsberdard]

No worries, the debt ceiling will be rise again. The US debt ceiling has been rising for the last 68 years or more 😁😁😁I'm curious if people who went through the financial crisis in 2008 had an easier time than me right now. The stock market is making me really worried because I've lost over $ 27, 000 in just this month and I'm not making as much money as I used to. This is making me concerned that I might not have enough money saved up for my retirement since I can't add to my savings.

[checkforme]

I would say TAKE ADVANTAGE OF THE RECISSION! Recessions are an unavoidable part of the economic cycle; all you can do is prepare for them and plan accordingly. I graduated into a slump (2009). My first job after graduating from college was as an aerial acrobat on cruise ships. Today, I work as a VP for a global corporation, own three rental properties, invest in stocks and businesses, run my own company, and have increased my net worth by $500k in the last four years.

[HafezBd]

Even if the market keeps falling, if you're an expert, you won't have any trouble making big gains despite the downturn. How long you are willing to hold will determine everything.

[Raymondjohn]

Well the recent events with SVB make it unlikely for the market to make significant gains soon, so it's wise to manage expectations and prepare for a potentially long recovery period. It's recommended to avoid making significant investment decisions until the economic environment stabilizes in areas of concern. It's best to exercise caution and avoid engaging with the current turbulence.

[hamzamahmood]

They should express national debt as a percentage of GDP rather than a number, that way people can compare it to other countries. $31 trillion is around 120% of U.S. GDP. Meaning America has a government debt 1.2 × its annual income.

[ClementRusso]

Don't fret, the debt ceiling always goes up. I wonder if 2008 crisis survivors had it easier. I'm concerned about the stock market, I've lost $35, 000 this month, and my income is down. Worried I won't save enough for retirement as I can't add to my savings.

[EmilyMoore-nn]

We Are in Unchartered Financial Waters! every day we encounter challenges that have become the new standard. Although we previously perceived it as a crisis, we now acknowledge it as the new normal and must adapt accordingly. Given the current economic difficulties that the country is experiencing in 2023, how can we enhance our earnings during this period of adjustment? I cannot let my $480, 000 savings vanish after putting in so much effort to accumulate them.

[AllisonSherman]

With changes in the economy leading to instability in the stock market, some individuals may face a decrease in their investments in an effort to benefit from the current market conditions, I am considering liquidating my $725k portfolio consisting of bonds and stocks. Someone else in the same situation? Please tell me in the comments!..

[lucastanner]

Congress: " I lost my glasses. But I need my glasses to find my glasses. Do you see the problem? Because I can't. "

[louieuy]

This is expected every year. I'm kinda numb to it now

[bumblebee]

At this point it means nothing…there is no ceiling to reach 😅

[tahaoyunda]

Can't deny the fact that *VRI TOKEN* has the strongest bet to bring lights back to this industry after we suffered FTX, Celsius, Tera and so on. Sure if they fail it's done for good but the pressure is too high and I think they will keep proper liquidity rather than these others. Don't see them going bankrupt any time soon.

[hammerfist]

It's catastrophic because our economy is too dependent on financing in the form of a borrowed, inflated currency.

[frankbieser]

Clearly defaulting on the bonds would be catastrophic. However, continuing to raise the debt ceiling on a path where payments on the debt will consume all revenues. We are already past the point where we are paying off the principle and just keeping up with the interest payment. This is the inherent problem with borrowing more money to cover payments on existing debts. Like people who've done this with credit cards, it's a hole that gets deeper and deeper until you get buried in it. The only way out is for congress to stop deficit spending to cover everything else it spends money on and to start whittling down the debt. This will be painful of course, but not as painful as total economic collapse. Since the Fed was created, we have been on a road that leaves us in the position of having to choose between two bad choices.

[darkking]

They always making this big deal but it will just end up being raised again and again. unlimited loop and money.

[kamwaichan]

No worries, the debt ceiling will be rise again. The US debt ceiling has been rising for the last 68 years or more 😁😁😁

[rbjgbji]

Great video, despite the inflation, productivity never happens by chance;it is always the result of careful preparation, dedication, and consistency.i thank GOD for my advisor MR. Yuval Eric Brokman; with his assistance between $10, 000 and $25, 000 every week.

[osmanyorulmaz]

I don't consider renting passive income unless you have professional property management. Most people who rent don't count their time and effort needed just to make a tiny return on their massive investment. For example, you invest $599, 000 to buy a second home and rent it out for $3000 a month. Let assume you are cash flow positive on the property and you make $1000 a month or $12, 000 a year. What would your annualized return be? 2 percent on the entire amount. Now, you can argue that your return is much higher since you only put down $120, 000 on the property. However, you are on the hook for the full $600k regardless of what the future FMV of the house is. Furthermore, people assume that their home will always appreciate in value however, this is a false assumption you can make. In the best case, you will gain some capital appreciation thanks to the central bank increasing the money supply, however, if inflation heats up, you can see your property actually start to lose money in real terms. This is because there is an inverse relationship between housing and nominal interest rates. The central bank will attempt to slow down inflation with higher interest rates and curb lending. We haven't seen inflation in a big way but we can see all the massive stimulus money that the government is pumping turn into inflation while taxes will be hiked to pay for all the COVID spending, your best choice is to look into *VRI TOKEN* Its more profitable.

[mrmakeshft]

Imagine being a politician in charge of the national spending budget and not doing your job