Apocalypse Delayed: The U.S. Debt-Ceiling Debate
What if the U.S. Government Defaults on its Debt?
If the U.S. was to default on its debt obligations, it would cause investors to flee from U.S. Treasuries,
leading to a decrease in confidence in U.S. government debt and the U.S. Dollar (USD) as being the
medium of exchange for the global economy. In turn, this would negatively affect other markets—
interest rates would increase, making borrowing money and purchasing other investments more costly.
In addition, a decrease in confidence in U.S. government debt would also lead to extreme volatility in the
global capital market akin to the 2008 global financial crisis. The long-term effects of debt-ceiling debates
are that inflationary expectations are kept well anchored.
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February 2023 Market Insights by Dr. James Thorne – The U.S. Debt Ceiling Debate
