In the last few weeks, one thing has been a constant subject of discussion - Debt Ceiling. You may have though that you won't be affected by debt ceiling but you're wrong. Most of the people in this world will be affected due to this debt ceiling. Due to this debt ceiling, iIt may happen that the government will have to helplessly stand by and watch the economic problems rise.
What is debt ceiling all about?
Debt ceiling is just a limit on the total amount of borrowing that the government can have outstanding at a particular point of time.
How had the government dealt with debt ceiling in the past?
In the past, the government had hit the debt ceiling but had raised it in order to avoid a default on its obligation. But this time, the government doesn't want to increase the debt ceiling. As a result our financial security as well as our livelihoods will be at stake.
What can happen if debt ceiling is not increased?
Here are few things which might happen if debt ceiling is not increased:
- Rapid re-pricing of all financial assets in the downward direction.
- America's unblemished credit rating will be tainted.
- Tainted credit rating will plunge the value of IRAs, 401(k)s, etc.
- We'll face a new credit crunch and no one will lend money.
- The flow of credit will once again come to a halt.
- Unemployment will increase as companies will cut jobs to conserve cash.
How should the government deal with this?
Experts opined that the possibility of another economic crisis will prod Washington to deal with this matter asap. There have been instances where the Congress had voted down such bills only to reverse their decision later on. The government should take immediate decisions in this matter or else, the economic damage will be huge. The investors will start considering the U.S, government's debt as risky. In order to prevent this, Washington should increase the debt ceiling for the time being. Later on, the government can take steps in order to avoid increasing further debt ceilings.