To The Moon

US Debt Ceiling The debt ceiling is a legal limit on the amount of money that the United States government can borrow. If the debt ceiling is not raised, the government will not be able to borrow any more money and will eventually run out of cash to pay its bills. This could have a number of negative consequences, including: A government shutdown: If the government runs out of money, it will not be able to pay its employees or continue essential services. This could lead to a government shutdown, which would have a significant impact on the economy. A default on U.S. debt: If the government cannot borrow any more money, it may be forced to default on its debt. This would have a devastating impact on the economy and could lead to a global financial crisis. A loss of confidence in the U.S. government: If the government defaults on its debt, it will lose the confidence of investors around the world. This could make it more difficult for the government to borrow money in the future and could lead to higher interest rates. The debt ceiling has been raised 78 times since 1960. The most recent time was in 2021, when Congress raised the debt ceiling by $2.8 trillion. The debt ceiling is currently set at $31.4 trillion. The debt ceiling is a controversial issue. Some people believe that it is a necessary tool to control government spending, while others believe that it is an unnecessary constraint on the government's ability to borrow money. The debate over the debt ceiling is likely to continue in the years to come. Impact of a US default A U.S. government default would have a significant impact on developing and developed countries around the world. The U.S. is the world's largest economy and the largest holder of foreign reserves. If the U.S. defaults on its debt, it would send a shockwave through the global economy. Here are some of the potential impacts of a U.S. government default on developing and developed countries: Stock market sell-off: A U.S. government default would likely lead to a sell-off in stock markets around the world. Investors would lose confidence in the global economy and would sell stocks in order to protect their money. Increased interest rates: A U.S. government default would likely lead to increased interest rates around the world. Investors would demand higher returns on their investments in order to compensate for the risk of a default. Reduced economic growth: A U.S. government default would likely lead to reduced economic growth around the world. Businesses would be less likely to invest and consumers would be less likely to spend money. Increased inflation: A U.S. government default would likely lead to increased inflation around the world. The value of the U.S. dollar would decline, which would make imported goods more expensive. Here are some of the potential collaterals of a U.S. government default: A global financial crisis: A U.S. government default could trigger a global financial crisis. This would be caused by the loss of confidence in the global economy and the increased risk of default by other countries. A decline in the value of the U.S. dollar: A U.S. government default would likely lead to a decline in the value of the U.S. dollar. This would make it more expensive for Americans to buy imported goods and would make it more difficult for U.S. companies to compete in the global economy. Increased political instability: A U.S. government default could lead to increased political instability in the United States. This could be caused by the loss of confidence in the government and the increased risk of social unrest. The impact of a U.S. government default would be significant and far-reaching. It is important to be aware of the potential risks and to take steps to protect your investments and your business. Impact of a US Default on Developing and developed countries A U.S. government default would have a significant impact on developing and developed countries around the world. The U.S. is the world's largest economy and the largest holder of foreign reserves. If the U.S. defaults on its debt, it would send a shockwave through the global economy. Here are some of the potential impacts of a U.S. government default on developing and developed countries: Stock market sell-off: A U.S. government default would likely lead to a sell-off in stock markets around the world. Investors would lose confidence in the global economy and would sell stocks in order to protect their money. Increased interest rates: A U.S. government default would likely lead to increased interest rates around the world. Investors would demand higher returns on their investments in order to compensate for the risk of a default. Reduced economic growth: A U.S. government default would likely lead to reduced economic growth around the world. Businesses would be less likely to invest and consumers would be less likely to spend money. Increased inflation: A U.S. government default would likely lead to increased inflation around the world. The value of the U.S. dollar would decline, which would make imported goods more expensive. Here are some of the potential collaterals of a U.S. government default: A global financial crisis: A U.S. government default could trigger a global financial crisis. This would be caused by the loss of confidence in the global economy and the increased risk of default by other countries. A decline in the value of the U.S. dollar: A U.S. government default would likely lead to a decline in the value of the U.S. dollar. This would make it more expensive for Americans to buy imported goods and would make it more difficult for U.S. companies to compete in the global economy. Increased political instability: A U.S. government default could lead to increased political instability in the United States. This could be caused by the loss of confidence in the government and the increased risk of social unrest. The impact of a U.S. government default would be significant and far-reaching. It is important to be aware of the potential risks and to take steps to protect your investments and your business. Impact of a US Default on various asset classes Here is a detailed explanation of how a US default would affect the various asset classes: Real estate: A US default would likely lead to a decline in the value of real estate. This is because investors would lose confidence in the economy and would be less likely to invest in real estate. Equities: A US default would likely lead to a sell-off in the stock market. This is because investors would lose confidence in the economy and would be less likely to invest in stocks. Bonds: A US default would likely lead to a decline in the value of bonds. This is because investors would demand higher yields on bonds in order to compensate for the risk of a default. Commodities: A US default would likely lead to an increase in the price of commodities. This is because investors would seek out safe haven assets and commodities would be seen as a safe investment. Digital assets: A US default would likely lead to a decline in the price of digital assets. This is because investors would lose confidence in the economy and would be less likely to invest in digital assets. Here are some of the other asset classes that could be affected by a US default: Foreign currencies: A US default would likely lead to a decline in the value of the U.S. dollar. This is because investors would lose confidence in the U.S. economy and would be more likely to invest in other currencies. Insurance policies: A US default could lead to a decline in the value of insurance policies. This is because insurance companies would be less likely to be able to pay out claims if they were unable to borrow money from the government. Retirement savings: A US default could lead to a decline in the value of retirement savings. This is because retirement savings are often invested in stocks, bonds, and other assets that could be affected by a default. The impact of a US default on asset prices would depend on a number of factors, including the length and severity of the default. A short-term default could have a limited impact on asset prices, while a long-term default could have a significant impact. It is important to be aware of the potential risks and to take steps to protect your investments and your business. . My investing muse The US is a global superpower and the leading economy. With USD being the global reserve currency, there are responsibilities that transcend beyond domestic policies. Global reserve currency Being the global reserve currency, the ability to turn on the money printer (almost at will) looks to be irresponsible. Without managing the Federal revenue and expenditure, the debt ceiling has risen 78 times since 1960. The latest stalemate stands at an obscene amount of over $31 trillion where a trillion stands with 12 zeroes behind. This “abuse” of the global reserve currency status could end up turning many off. A default could lead to an economic downturn that snowballed into the global economy. In fact, there are 30 countries which have expressed interest to join BRICS as per the screenshot above. For ease, let us call this group BRICS+. Is this the start of a breakaway? Some called this de-dollarization. It is astounding how one can turn a blind eye to the domestic challenges Debt Ceiling has become a regular occurrence. Is there a reason why the USD-bond buyers need to endure the duress from “potential” defaults? Would this not lead to countries and companies turning away from US-issued bonds and treasuries in lieu of the duress that they bring? Political division The US is more divided than united. From woke to racism, gun violence to abortion, the political divide stands out loud. At the current rate of division and profiteering, the greatest enemies of the US are not external but rather domestic. There is nothing wrong with diversity of value. However, people are becoming overly binary when people started drawing lines in the sand. For many issues in the debate, there are bigger areas of grey than just a simple right or wrong. I feel that it is sad that a modern superpower like the US has lost the ability to “disagree respectfully”. As seen in the recent debt ceiling debacle, the US is more than capable of implosion. Being the global reserve currency, we are seeing how domestic issues will spill over into the international market. If the current government is unable to spend within its means, are we simply looking at a global Ponzi scheme? Are we witnessing the fall of one of the greatest nations? There is still time for leaders to divert the course of this great country. There is also a point of no return. When the government pays more to service its debt interest than its defence spending, is this not a red flag for the country? As a non-US citizen, I have grown up under the US superpowers and have benefitted from its many great businesses and innovations. Long may this continue. With these red flags, concerns are expected. Domestic challenges The US has reported one of the highest credit card debts as per the screenshot of the news above. Commercial real estate (CRE) is under distress in cities such as San Francisco which has reported vacancy of over 30%. A healthy vacancy rate is less than 10%. The latest FOMC meeting minutes have forecasted a “mild recession”, a real GDP decline and an increase in unemployment under this sticky inflation. More interest rate hikes have been made in provision by the market. In the midst of this, the news of Nvidia becoming the next trillion-dollar market cap business has erupted on Wall Street. AI will be the next tour de force. Nvidia has a distance to go before establishing itself as a chip and AI powerhouse. While they have an optimistic outlook, let us not forget the weakening macro conditions. Let us not forget to take profits while we can. In conclusion, we can expect much volatility but we should expect the debt ceiling to be raised eventually. I have shared my concerns and thus, I have adjusted my investing portfolio accordingly. It is a good time to be cautious. If we are still holding to businesses with weakening fundamentals, let us consider taking profits or stopping losses accordingly. Let us research before we invest. @TigerStars $S&P 500(.SPX)$