The 24 trillion dollars worth of the US treasury market is in a situation where economists are now analyzing the economic upheaval that can knock on the doors anytime soon.

In the latest tweet, President Joe Biden tweeted,

“According to economists, 8 million Americans could lose their jobs if our nation failed to pay its bills. The consequences would be catastrophic for folks across the country and the globe. Default is not an option.”

The US debt bond has reached its limit already. Additionally, the US Treasury Department is trying all methods to reserve cash.

1. Consequences of Defaults 

Default could have many important consequences and grave implications. But these consequences cannot be predicted precisely.

Some possibilities would be; high pressure on the market sector of the USA, constant bankruptcy, recession in the economy, and whatnot.

Because all of the above-mentioned consequences would ruin the progress of many years.

It could also push the country’s economy to its lowest level. Moreover, it can endanger America’s strong position in the global economic order.

As of now the possibility of default is not high. According to the assurances from the lawmakers in opposition, they are suggesting that the deal elevate or freeze the debt limit.

Investors, policymakers, analysts, and leaders from all over the world are keeping an eye on the current debt situation.

Moreover, they are trying to make predictions about all the bad things that could happen in the future.

2. Nightmare Occurs Even before the Default 

It is no secret that some financial institutions, banks, and markets have already started to fall apart. However, this tsunami of debt default is going to make these fallouts nothing.

The treasury market of the United States serves as the strongest and biggest bond or debt market. Moreover, it is the major source of funding for the US government.

This treasury market of the US is very reliable but not sure if it holds the reliability anymore or not.

It is very important for interest rates and dollars since it is the most used and trustworthy currency all over the world and is the root of the US financial market as well as for other countries.

The guarantee that comes from the US government on treasury debt or bond is considered the same as currency.

If this kind of guarantee gets in question then it would be very difficult for the government to control its impact.

3. Impact of the Delayed Payments 

There are some financial institutions or banks that have membership in a federal payment network called Fedwire and these help the government to pay back the debts.

These payments make their way to market and then into the accounts of the debt holder which includes pensions, personal savings, and insurance policies.

If the situation worsens and debt default occurs then the danger of holding treasury debt or bonds can elevate immediately. This would also make it pricey for the US government to borrow money in the upcoming future as well.

Last Updated on June 3, 2023 by ritukhare