The Congressional Budget Office (CBO) has recently released an update to the Budget Outlook for 2023 to 2033 which stressed that if the debt ceiling is not increased or suspended, the United States government may face significant risk of default in June. The Treasury Department and CBO estimated that the default could occur on June 1. This warning sent shockwaves across the economic world and several economic entities voiced their concerns over the severe implication of U.S. defaulting on its debt obligations. The International Monetary Fund (IMF) and Federal Reserve Chair Jerome Powell have warned the effects could be "very serious" and “uncertain and adverse" respectively. Furthermore, the chairman of the U.S. Securities and Exchange Commission (SEC) Gary Gensler has anticipated "significant and lasting effects". On the other hand, former President and 2024 presidential candidate Donald Trump has urged Republican lawmakers to let the U.S. default on its debt if the Democrats do not agree to spending cuts.

The possibility of a U.S. default carries with it massive implications, not just for the country itself, but for the world economy as well. A default by the U.S. could lead to a financial crisis, resulting in a spike in interest rates, bankruptcy proceedings, and reduced investor confidence in the markets. It would also likely mean a decline in the value of the US dollar and a further weakening of the already fragile economic recovery. Moreover, it would increase the cost of borrowing for businesses, leading to increased prices and job losses. For these reasons, it’s in the best interests of the U.S. and the global economy to avoid a default.



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