The government gives us many things that we need, like schools, hospitals, police or roads. But all of that costs money. The government gets that money from the taxes that we all pay. Sometimes the government crosses the line and spends more than it has. So you have to borrow money. It does this by selling bonds that promise to pay interest to whoever buys them. But the government has to return that money and sometimes it is not enough with what it gets from taxes. So you have to borrow more money to pay the money you owe. He sells more bonds to pay off the bonds that are due. But there is a problem: the government cannot borrow as much as it wants, because there are laws that put a cap on it. SIf he reaches that limit and cannot ask for more, he runs out of money to pay his debts. This non-payment situation is very bad, because nobody is going to want to lend more and the country is going to remain stagnant.
What is happening in the United States? Well, US Treasury Secretary Janet Yellen has been calling on CEOs and business leaders to discuss the consequences of no debt limit deal. The calls come after Yellen sent a message to Congress warning that the United States could default on its obligations as of June 1 if lawmakers do not address the issue before then — an expedited deadline that increased pressure on the president. Joe Biden and House Republican lawmakers to intensify their talks.
The Congressional Budget Office has also forecast that there is a “significantly higher risk of Treasury running out of funds in early June” due to weaker than expected tax collections. In a report released last week, White House economists said a prolonged default would eliminate more than 8 million jobs and halve the value of the stock market. The report estimated the impact under three scenarios: no deal, short default and long default. In other words, we are talking about a real disaster.
Wall Street officials warned of the “unthinkable” long-term implications of a US default and argued that the debt limit should be permanently repealed.. However, everything seems to indicate that financial firms have to prepare for a possible default. Really, anything that is said is little, because the magnitude of the adverse consequences of a prolonged negotiation or a default is immeasurable. What should be done is to raise the borrowing limit “with all due haste” and seek a permanent solution to the problem.
The United States has a problem: it is running out of money and needs Congress to allow it to borrow more. If you don’t do it soon, you could stop paying your bills and cause financial disaster. That would be terrible for the country and for the world. But politicians disagree and investors don’t seem very concerned. Because? The cost of not solving the matter is so high that everyone thinks that in the end everything will be fixed, like other times. But some experts say that this time is different and that we must act now. What will happen? No one knows for sure, but you have to be vigilant. Due to such radical political polarization, there is no doubt that the conservatives will only give in until the last minute. And that will add tension to the plot. Dogmatists are foolish, but not crazy. Sooner or later, the conservatives, in order to avoid a catastrophe, will have no choice but to give in and listen to reason.
What does the US debt ceiling mess have to do with the price of Bitcoin? Well, this mess has to do with the price of everything. Because almost everything in this world depends in some way on the solvency and confidence in the financial system of the United States. AND If Uncle Sam doesn’t pay his debts, hell breaks loose. There is no hope for anyone here. Neither for those who have dollars, nor for those who have euros, nor for those who have gold, nor for those who have BTC. Because all markets would be affected by an unprecedented economic crisis. So the politicians had better get together and avoid disaster. For the good of all.
There are people that they think they can benefit from a world on fire. They think that if everything goes to the bottom, they will be able to protect themselves with their gold or BTC reserves. They are seduced by the collapse narrative, which makes them feel more ready and prepared than others. AND they take advantage of any crisis to boost their favorite assets, hoping to get a piece of the general ruin.
But these people are making the wrong bet. They forget too often that if this ship sinks, we all sink.. There is no safe haven in a world on the brink. Gold and Bitcoin may work well in some crisis scenarios, but not all. As we know, they don’t hold up very well to deeper, more widespread collapses.
The United States has to pay its debts no matter what. If it doesn’t, Wall Street and the crypto market would crash. As simple as that. It would be a disaster for those who invest, those who lend and those who save. I mean, it would be a disaster for everyone. Including Bitcoin investors. Don’t be fooled: the price of Bitcoin depends on demand, and if there is a global economic crisis, the demand will drop dramatically. What is the use of having a scarce code if nobody wants to buy it? A default would be very bad for the financial system of the United States, which is the most important in the world. No one knows what would happen if the United States defaulted, but it sure wouldn’t be a good thing. Therefore, let’s hope that politicians agree and avoid chaos. For the good of all.
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