Published on Monday, February 6, 2023

US | The debt as a global problem

Again, as in 1995, 2011 and 2013, uncertainty over whether the US Congress will raise the Federal Government's borrowing limit is beginning to cause concern in the financial markets, which could increase going forward.

Key points

  • Key points:
  • A significant number of Republican congressmen have said that, unless deep spending cuts are implemented, they will not authorize raising the limit.
  • Treasury Secretary Janet Yellen fears that if the United States were unable to take on more debt, it would default on its obligations, both in terms of borrowings and other mandatory payments.
  • The consequences would be severe. In addition to the effects on the welfare of the population that would no longer receive aid, the repercussions for international financial markets would be extremely negative.
  • US Treasury bonds are considered risk-free assets (it is a country that has never defaulted on its financial obligations and has the power to issue the world's reserve currency) and are the most liquid asset in the world.
  • The Federal Government would have to be free to take on the debt required to meet this budget, but in the United States there is an additional requirement: Congress must approve the increase in debt necessary to meet the budget approved by the legislature the previous year.

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