The United States may default on its debt in early JuneTreasury Secretary Janet Yellen said earlier this week as politicians debate whether to raise the government borrowing limit.
President Joe Biden, the Republicans and the US economy entered a collision course after this warning, as the White House confirmed that it would not negotiate an extension of the government debt limit.
but, What will be the consequence of default or non-payment? The government will not be able to pay for everything from social programs to the military and, in what could be a catastrophic blow to global financial markets, the national debt.
Congressional leaders have been invited to meet with Biden next Tuesday Republicans, who control the House of Representatives, insist they will extend the debt limit if President Joe Biden first agrees to budget cuts. federal. The White House has repeatedly said no.
This possibility has been mentioned since the beginning of this year.This also means that the state, by law, cannot issue more bonds to finance itself, unless an agreement is reached with the opposition.
“If we don’t achieve this, the superpower will officially enter a state of technical default, a With few precedents in recent history, it can lead to far-reaching consequences For a country whose debts already account for 129% of its GDP”, El Economista de España titled in March.
It is that if a country defaults on its debts, it is said to default. Which means, in other words, that the The government is unable to pay the amount owed to its lenders. This can happen when countries are unable to meet their obligations to fund their national budgets or repay loans from foreign banks, companies or individuals.
According to the Economía3 portal, default or suspension is a common term in the financial sector to denote a situation in which the debtor does not comply with its legal obligations to its creditors as stipulated in the debt contract.
Defaults can occur on different types of debt, such as bonds, mortgages, or loans. In international economic terms, the term default is often used to refer to the non-payment of a country’s public debt. In other words, when A country decides not to pay its foreign debt.
between the The possible consequences of non-payment include some of an international nature, obviously economic and political, as well as to its citizens. The first is that the country may be excluded from the international financial markets, where it will be denied any type of credit. And in some cases where you can access credit, you will have to pay exorbitant amounts only for interest. It will also be subject to a ban and confiscation of its assets abroad. In conclusion, the country will be excluded from the international economy. Could this happen to the United States?
“It is a constitutional duty of Congress to avoid defaultWhite House Press Secretary Karen Jean Pierre said. He estimated that “given the short time Congress now has, it is clear that the only practical way to avoid default is for Congress to suspend the debt limit unconditionally.”
next to, Default can lead to high rates of inflation and even hyperinflation, which can hurt the local economy. All this can lead to a loss of investor confidence and capital flight for future investments. Finally, investors may not want to buy any financial products from that country for fear of another default in the future. Finally, the government will also lose credibility both nationally and internationally.
Joe Biden, specifically, actually faced a similar situation in 2011, when he was Vice President to Barack Obama. Republicans took control of the House of Representatives in the 2010 legislatures, buoyed by a wave of anti-government spending led by the so-called “Tea Party”. His goal was to persuade Obama to accept cuts to offset the $831,000 stimulus package approved in 2009 to limit the effects of the financial crisis.