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What is the ‘debt ceiling’ crisis against America? Threat to the world’s largest economy!


The topic of America’s ‘debt limit’ remains a topic of discussion these days. The world’s most powerful economy seems to be going through a crisis and it is being discussed all over the world. If there is no agreement between the government and the opposition in America on the debt limit before June 1, then the world’s most powerful country will default. Let us tell you that in the past, US Treasury Secretary Janet Yellen had written a letter to the US Parliament saying that the government should not increase the borrowing limit, otherwise it will not be able to pay the US bill in June, because the money will run out. has ended up in the government treasury.

Understanding the Debt Limit Crisis

The seriousness of the matter can be understood from the fact that US President Joe Biden canceled the Quad meeting to be held in Sydney so that the issue of debt ceiling could be resolved in time. In fact, the debt ceiling problem facing America today has many years of development behind it.

What is the loan limit?

All the countries of the world have their own expenditure, governments – social security scheme, medical scheme, military, incentives for industries and many other types of expenditure. To meet these expenses, governments raise revenue through taxes or other sources. The cost is usually always higher than the earnings. America is also not untouched by this bitter truth.

America takes loans to meet its expenses, but there is a limit to the amount of loans it can take, because these loans also have to be repaid. Efforts are being made to increase this limit called debt ceiling. Every year America spends more than it earns. The deficit has grown from $400 billion to $3 trillion in the last 10 years.

Is America about to default?

America takes a loan to pay the bills of the government, which it has to repay with interest. The US government sometimes raises its debt by issuing bonds and sometimes by issuing other securities, but after some time its borrowing limit is exhausted. In such a situation, if the US Treasury needed money to meet government spending, it would not have it and would default.

US Treasury chief Janet Yellen has asked the US Congress several times to raise the debt limit, to save the US from the risk of a historic default. The US debt ceiling currently stands at $31.4 trillion, while the US has borrowed $30.1 trillion so far.

However, the history of America is such that this loan limit has been increased many times. It has raised this limit 78 times since 1960 and has never defaulted. So this time also if the US Parliament increases the limit, then America will be saved from default.

How did this situation happen?

Between 2001 and 2008, when recession gripped the US and the world, the US pumped money into the financial system to get its country out of the recession, which continued for several years. In 2017, the Trump administration cut taxes, which limited the source of revenue. The pressure on the coffers of the US government has increased. Meanwhile, America was deeply in debt.