What Happens If The U.S. Defaults On Its Debt? Here's Why It Won't

Money For the Rest of Us

J. David Stein

Investing, Investing Podcast, Business, Economics, Economy

4.5 • 1.4K Ratings

🗓️ 17 May 2023

⏱️ 31 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

What are the grave consequences if the U.S. debt ceiling isn't increased and the government defaults? What would the Federal Reserve and the Executive Branch do to prevent default if Congress doesn't act?

Topics covered include:

What are the potential impacts of a U.S. default on the stock and bond markets, and the overall economy
What causes the U.S. to have a perennial debt ceiling crisis
Why it is uncertain when the U.S. government would run out of money to meet its obligations
What the Biden Administration could do to prevent a default
What the Federal Reserve could do to prevent a default
Given the ongoing crisis, should you shift assets from stocks to cash?

For more information on this episode click here.

Sponsors

Use code MONEY10 to get 10% off on your NAPA Autoparts online order.

Masterworks – invest in contemporary art

Masterworks Disclosure:

“net IRR” refers to the annualized internal rate of return net of all fees and costs, calculated from the offering closing date to the sale date. IRR may not be indicative of Masterworks paintings not yet sold, and past performance is not indicative of future results. See important Reg A disclosures: Masterworks.com/cd

Masterworks’ offerings are filed with the SEC, view all past and current offerings here.

Insiders Guide Email Newsletter

Get our free Investors' Checklist when you sign up for the free Money for the Rest of Us email newsletter.

Show Notes

The Debt Limit Since 2011—Congressional Research Service

7 doomsday scenarios if the U.S. crashes through the debt ceiling by Jeff Stein—The Washington Post

A debt ceiling default would send the U.S. housing market back into a deep freeze by Jeff Tucker—Zillow

Why is federal spending so hard to cut? — Recurring debt ceiling fights will only be solved by budget reform by Linda Bilmes—Brookings

Debt Limit Default Is Default, Even Under a “Prioritization” Scheme by Richard Kogan—Center on Budget and Policy Priorities

Why I Changed My Mind on the Debt Limit by Laurence H. Tribe—The New York Times

The Trillion-Dollar Coin Might Be the Least Bad Option by Annie Lowrey—The Atlantic

If U.S. again risks default, Fed has 'loathsome' playbook by Ann Saphir—Reuters

Related Episodes

169: The Debt Ceiling—What Happens If the U.S. Defaults

416: Your Nation’s National Debt: 5 Things You Need To Know

See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Transcript

Click on a timestamp to play from that location

0:00.0	Welcome to Money for the Rest of Us.
0:02.6	This is a personal financial show on money, how it works, how to invest it, and how to
0:07.7	live without worrying about it.
0:10.1	I'm your host, David Stein, today's episode 433.
0:13.7	It's titled, What If The US Defaults On Its Debt?
0:18.2	Here's why it won't.
0:21.0	This week, Treasury Secretary Janet Yellen reinforced her warning that the US risks
0:28.5	running out of cash as early as June 1st, unless Congress raises the debt ceiling, the amount
0:37.1	of money that the US Treasury is allowed to borrow in order to meet the US government's
0:44.3	obligations.
0:45.3	The Congressional Budget Office this week warned there is significant risk that the US government
0:51.4	would be unable to pay all of its obligations within the first two weeks of June, unless
0:57.9	the debt ceiling is raised.
1:00.6	If the debt ceiling isn't raised, and the US defaults on its debt, Mark Zandy, chief economist
1:08.8	at Moody's said it would be a lethal combination.
1:13.4	You can see how this thing could really metastasize and take down the entire financial system,
1:20.3	which would ultimately take out the economy.
1:23.9	If you look at other predictions of what could occur, if the US government defaults on its
1:29.9	debt because Congress didn't raise the debt ceiling, the stock market could crash anywhere
1:35.3	from 20% to 45%, according to some predictions, interest rates would spike, potentially we
1:42.4	would see mortgage rates for home purchases in the US exceed 8%.
1:48.2	There are securities that depend on US treasuries, repurchase agreements, for example, a repurchase
	...

Please login to see the full transcript.

Previous episode | Next episode

Disclaimer: The podcast and artwork embedded on this page are from J. David Stein, and are the property of its owner and not affiliated with or endorsed by Tapesearch.

Generated transcripts are the property of J. David Stein and are distributed freely under the Fair Use doctrine. Transcripts generated by Tapesearch are not guaranteed to be accurate.