Recently, the dispute between the Democratic Party and the Republican Party has intensified due to the "debt ceiling" issue of the US government。The debt ceiling in the United States is the maximum legal debt limit set by Congress for the federal government。The debt ceiling includes all public debt issued by the U.S. government, such as Treasury bonds, federally guaranteed debt, and debt held by Social Security and other trust funds。Simply put, the debt ceiling is the maximum amount the U.S. government can borrow。
If the two parties cannot agree to raise the debt ceiling by June 1 of this year，Would leave the U.S. government with no money to spend，Government offices are temporarily closed - a situation caused by the power to appropriate the budget in the hands of Congress，Congress won't pass a budget，It means the government can't spend money，Many projects that cost money cannot continue，Government workers will also struggle to pay their salaries。
The "debt ceiling" sounds draconian, as if it were a limit on government spending。But in fact, the so-called US government debt ceiling will only affect its ability to pay existing bills, and does not affect the US government's approval of more spending plans。And even if Congress does not approve an increase in the debt ceiling this time, leading to a government shutdown, it would not be the first time this has happened。
In the 19 years from 1977 to 1996, the federal government shut down 17 times, an average of almost once a year, the shortest one day, the longest 21 days。The longest shutdown of the United States government occurred at 8 p.m. on December 21, 2018, when the Senate adjourned without reaching any agreement on the next step of funding the federal government。Since the early morning of the 22nd, some departments of the US federal government have been shut down until January 25, 2019, which is the longest shutdown in history。
Because U.S. government spending and budget appropriations are not the same line，Government spending is constrained by Congress，Regular government shutdowns are nothing new，Especially as government spending gets bigger and bigger，Budgets can't keep up with spending，The door to government is closed for now，The American public is no stranger to this，The impact on our daily lives is immense。
If history is any guide, Congress will eventually agree to raise the government's spending cap, but the process is sure to be tortuous。Moreover, the impact on gold, bonds and interest rates in the international market during this period cannot be underestimated。In 2011, the debt ceiling crisis of the United States led to the downgrade of the sovereign credit rating of the United States by the international rating agency Standard & Poor's, which triggered a big shock in the United States and global financial markets, and the scene was very chaotic。Although in the face of the current debt ceiling impasse, the mood of the international financial market has remained relatively stable, but with the gradual approach of the expiration date of the debt ceiling, if the US government is unable to effectively solve the current debt ceiling impasse, the financial market may suffer another shock, which may encounter the following situations。
The default of the US debt will cause the US Treasury to be unable to pay the interest and principal of the debt on time, which will force the Treasury to take debt restructuring measures, which may lead to greater financial pressure on the US government departments, and may even cause the US government to default on its debt。A default on U.S. debt could lead to a downgrade in the credit rating of the United States, which would make investors more cautious about U.S. bonds and other financial products, leading to market volatility and falling prices。A default on U.S. debt could cause turmoil in financial markets at home，This is especially true for financial products and derivatives denominated in US dollars，Because its value depends on the value of the dollar，So a default could cause the value of these products to fall，Triggering panic and selling among investors，Increased volatility in financial markets，Risk assets such as the US Treasury sell-off and soaring interest rates tumbled。A default on U.S. debt could slow economic growth at home, with businesses and consumers stretched and sluggish because they can't pay their bills on time。At the same time, it will also affect investor confidence in the global market and trigger turbulence in the international financial market。
In short, if the U.S. debt explosion will have a great impact on the U.S. economy and international financial markets, and may trigger global financial market turmoil。Therefore, the US government and financial institutions need to take measures to avoid default and gradually reduce the size of their liabilities。Us Treasury Secretary Janet Yellen recently said that if Congress fails to raise 31.A default on the $4 trillion debt ceiling would deal a huge blow to the U.S. economy, potentially triggering financial chaos and undermining the dollar's status as the world's reserve currency。
However, from the current situation, the international financial market has not been disturbed by the debt ceiling issue, but the potential debt crisis is still a major risk that market investors have to face。Republican congressional leaders and the White House are still locked in protracted negotiations over budget cuts as part of a deal to raise the debt ceiling and ensure there is enough money to pay for all government spending as soon as June 1。
(Source: International Business Daily)