Debt ceiling crisis is a financial crisis occurring where the country is running out of money. This is where the country will no longer be able to borrow more money as it has already exceeded the maximum amount allowed for it to borrow.
The current debt ceiling took place in the United States where there was a financial crisis in 2011 that just started as a debate in the United States congress about increasing the debt ceiling where the compromise deal saw the raise of the debt ceiling by as much as $2.4trillion. It also saw cuts of more than $900 billion over the next ten years in spending from programs and various agencies.
Debt ceiling will bring many effects especially to the economy. Funds coming from the US will be put on hold and this will affect most of the countries that look upon it for financial boost. If US can’t address its financial problems, it will affect the whole world even if it’s under going a recession.
This will in turn lead to a change in the way people view United States as a financial super power and might also cause shifts in power to another powers. People will look at it as a failed nation and find other alternative sources of security and money that they need. Furthermore, according to the United States laws, the United states Department of treasury cannot incur more debt above that set by the congress.
That is why the congress had to raise the debt ceiling because by not doing so, it would have resulted in the government not being able to functions properly. The people will feel an effect of this crisis in the value of their investments. This is because their investments will go down and interest rates will in turn go up.
Other things like mortgages, auto loan and credit card rates would also go up. The price of commodities as oil, gold and your shopping are also expected to go up drastically. In addition, people who rely on money from the government will also suffer and face financial difficulty in the future.
But people are being asked not to panic as the government still has cash and can try to pay for its bills up to the deadline set. That means that more negotiations are still underway to see how the debt ceiling can be improved to better the economy.