The infrastructure surrounding the debt ceiling
The US national debt limit has been listed as 31.4 Trillion. We are vastly approaching that limit. Congress is in charge of either raising the limit or allowing it to fall to default. In addition to devising financial solutions Janet Yellen the Treasury Secretary is also in charge of managing domestic and international finances. Crucial tax policies, and fiscal policies are also important variables of this archetype. This section of the financial infrastructure is a major part of the economy that maintains overall debt. That being said the Treasury Secretary when it comes to congress can only advise and give her recommendation. All decisions have to be voted on. Currently Senate Minority Leader Mitch McConnell is suggesting Speaker Kevin McCarthy to negotiate with the White House on debt ceiling legislation.
What measures are in place to prevent a default
Treasury Secretary Janet Yellen is taking another step to temporarily delay the US from defaulting on its debt. She wrote to Speaker Kevin McCarthy and she informed him that she is taking steps that will help the government pay bills within the deadline and for the moment delay a default. This is a temporary solution designed to facilitate order for the American institution. The outcome may come down to Speaker Kevin McCarthy and President Joe Biden.
What happens if the debt ceiling goes to default
If the debt ceiling goes to default it becomes a sovereign default which is when a country’s government does not pay its debt. Sovereign default can unfortunately put stress on a country’s economic growth and dramatically affect borrowing from overseas. Without borrowing the nation turns inward and begins to cut down on expenses. Interest rates would rise in systemic fashion such as credit cards, home mortgages, and potentially business investments. This would undoubtedly inflate the cost of living.
Possible inflation and employment
Unemployment is projected to reach 7% if debt turns to default. National unemployment is at the moment 3.5%. Most jobs will be negatively impacted by inflation. However some jobs and areas of the economy would actually benefit from this.
Jobs and areas of the economy that excel from inflation
- The energy sector
- Real estate
- The healthcare industry
- Financial companies
- Consumer staples
- The agricultural industry
Executive search companies guiding employers through a recession
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