Default on $31 TRILLION in Debt
Is the US about to default on $31 TRILLION in Debt? If Congress and the President don’t raise the debt ceiling by June 8th then there could be big problems for the US Economy & Housing Market.
Research from Zillow suggests that the US Housing Market would go into a deep freeze is the Debt Ceiling doesn’t get increased. With Mortgage Rates going to 8.4%. And home sales collapsing to the lowest level on record.
Will the US actually default? Well, bond buyers have started pricing it in. The yield on the 1-month US treasury has surged up to 5.7% over the last month from a low of 4.2% in April. Indicating an increased if default.
The underlying problem here is that the US debt has increased so much in the last two decades that it has become unsustainable. Registering at over $31 Trillion today, which is more than 3x higher than it was in 2008 just before the last crash.
The debt keeps increasing because America’s government keeps spending more than its tax receipts. Creating a high deficit every year. Which ultimately causes the debt to grow by more.
Most Americans want Congress and the President to cut spending as part of increasing the debt ceiling. But that will be a difficult task. Because over 65% of the federal budget is tied up in Social Security, Medicare/Medicaid, and Interest on the Debt. Items which are mandatory and cannot simply be “cut”.
The end result is that discretionary spending and state/local aid will need to be cut to keep the debt from growing astronomically. Something which will hurt economic growth and increase the risk of recessions in the future. And also create problems for the Housing Market.
Credit to : Reventure Consulting