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· Posted on
February 21, 2024

The US has agreed to raise the roof with an in-principle agreement to extend the debt ceiling for the 79th time

The US just announced that there's been an 'in-principle' agreement to raise their debt ceiling.

What's the key learning?

  • The US congress had two options: They could raise the debt ceiling and allow themselves to borrow more money, or they could default on its debts - which is something that's never happened in the US before.
  • The debt ceiling has never been breached, and there's a good reason why.
  • The US dollar is the world's most influential currency in the world and used for most international trade - so if they were to default, the confidence of the US dollar would be shattered.

👉 Background: For the past few months, the US has been creeping closer and closer towards the 'debt ceiling'. This was set at $31.4 trillion dollars.

👉 What happened: Now, the US just announced that there's been an 'in-principle' agreement between President Joe Biden and the Republican opposition to raise the debt ceiling.

👉 What else: The US congress had two options:

  • They could raise the debt ceiling and allow themselves to borrow more money, or;
  • They could default on its debts - which is something that's never happened in the US before.

What's the key learning?

💡The debt ceiling has never been breached, and there's a good reason why.

💡If the US doesn't raise the debt ceiling, and ends up defaulting on its debts, the fallout could be enormous:

  • The short term: The government will be unable to pay for welfare benefits and other financial support.
  • The long term: The default would likely push the US into recession, spike the unemployment rate and possibly ignite recessions in other countries.

💡The US dollar is the world's most influential currency in the world and used for most international trade. So if the US was to default, the confidence of the US dollar would be shattered.

‍

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