Default Risk in the United States: What Does It Mean for Developing Countries?

What would happen if the United States ran out of money and couldn’t meet its financial obligations ? Many people wonder about this since the Biden administration cannot agree with Congress on raising the debt ceiling . The Secretary of the Treasury Janet Yellen has expressed concern that the US might experience a financial catastrophe on June 1 if the nation runs out of currency . But what exactly does this imply for underdeveloped nations?

So, What Is This “Debt Ceiling” That We Are Talking About?

The debt ceiling is a policy that limits the amount of money the government may borrow to pay for its debts . The issue is that governments usually spend more than their tax income so they have to attract foreign and domestic capitals via treasury bonds . On the other hand Congress usually increases the debt ceiling to not to default on the debts . Yet sometimes it is used as a political leverage

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