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Goldman Sachs Exchanges

What happens if the U.S. government can’t pay its bills?

Goldman Sachs Exchanges

Goldman Sachs

Business

4.41K Ratings

🗓️ 2 May 2023

⏱️ 27 minutes

🧾️ Download transcript

Summary

The debate over the U.S. debt ceiling is quickly heating up. If the debt limit is not lifted before the deadline, what does this mean for markets and the economy? In this episode, Goldman Sachs Research’s Alec Phillips, chief U.S. political economist, explains how a failure to raise the limit on US government debt could ripple through the global financial markets.

Transcript

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0:00.0

The debate over the US debt ceiling is quickly heating up.

0:03.0

If the debt limit is not lifted before the deadline,

0:05.9

what does this mean for markets and the economy?

0:08.5

I would expect to see a substantial increase in equity volatility. A delay of any more than a few days could be really damaging because you would just pull a lot of money out of the economy.

0:20.0

This is something that could certainly tip the economy into recession if it lasted for any period of time.

0:24.8

I'm Allison Nathan and this is Goldman Sachs exchanges. The U.S. government's deadline to raise its debt ceiling could be here sooner than expected.

0:41.0

That pulls forward the risk of a debt default that could ripple through global

0:44.8

financial markets. To explain how we got here, the potential impact on markets and the path forward,

0:50.3

I'm here with my colleague in Goldman Sachs research, Alec Phillips,

0:53.3

a chief U.S. political economist.

0:55.1

Alec, welcome back to the program.

0:56.5

Thanks.

0:57.5

So just a level set for our listeners.

0:59.8

Can you just explain to us what is the debt ceiling and why our concerns over it

1:04.1

ramping up? So the Treasury hit its borrowing limit of 31.381 trillion in

1:11.4

January. The borrowing that Treasury does

1:14.2

is used to finance the budget deficit,

1:16.7

which basically occurs because the Treasury

1:19.1

the Federal Government spends more money

1:21.5

than it collects in taxes.

1:23.2

Raising the debt limit happens once every couple of years

1:26.6

because Treasury debt rises over time.

...

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