Title: The upcoming debt ceiling showdown: What it means for investors
Raising the U.S. debt ceiling isn’t the same as raising the rooftop on your home. It’s more along the lines of trying to get your credit card company to increase your spending limit when you don’t have the cash to immediately pay for things all at once. But the more you borrow the more you’re on the hook for paying. Things are fine as long as you can keep paying your monthly bill. But as soon as you start missing monthly payments or don’t have the money to pay off your credit card bill altogether you can face late penalty fees, bad credit scores, and even legal action.
By the end of September, Congress must vote to pass a spending bill to raise the country’s debt ceiling in order to pay the country’s bills and debt obligations. Lawmakers remain optimistic that they will be able to pass a spending bill in time to meet the nation’s debt obligations and keep the U.S. Government running. However, failure to do so holds negative ramifications for both the United States and global financial markets at large.
As an investor with a 401K or other retirement plan, you might have some concerns about the upcoming debt ceiling deadline. Having a better …show more content…
Treasury simply would not have the money to pay its debt (mentioned above) and the U.S. government could be shutdown. The credit rating of the United States, which determines how much interest the country pays to borrow money, could be lowered and result in higher finance costs for future debt issued. In the short term, global financial markets could also be negatively impacted. For instance, the yields or the amount of interest the U.S. Government pays to investors that purchase long-term maturity Treasury bonds might even decline. Over the longer term, investors might even lose faith in U.S. Treasury bonds as a safe place to invest their retirement