The U.S. debt ceiling deadline for 2019 is inching closer. It is also inching closer faster than lawmakers anticipated it might, after last raising the debt ceiling in March. U.S. Treasury Secretary Steven Mnuchin, is, therefore, encouraging lawmakers to raise the ceiling again before Congress leaves for its annual summer recess.
Why The Debt Ceiling Deadline for 2019 is a Big Deal
Is it possible that the U.S. will run out of cash by September? US Treasury Secretary Steven Mnuchin believes it is a strong possibility. Worse, if that happens, the U.S. will instantly become unable to service its current debt burden of $22 trillion.
Writing to House Speaker Nancy Pelosi on July 12th, Steven Mnuchin has urged Pelosi to take action now, to avoid a potential September crisis.
“Based on updated projections, there is a scenario in which we run out of cash in early September, before Congress reconvenes. As such, I request that Congress increase the debt ceiling before Congress leaves for summer recess.” – Source
What Happens if Lawmakers Do Not Raise The U.S. Debt Ceiling?
Not raising the U.S. debt ceiling will cause “unthinkable” damage to the global economy. At least, that is the case being put forward by Federal Reserve Chairman Jerome Powell. Moreover, the reasons for this are simple.
The U.S. relies on continuous borrowing and the issuing of U.S. debt backed bonds, to fund day to day business. When America can no longer borrow money to service its debt, several things can, therefore, happen.
- The U.S. government can partially shut down. During this time, Federal employees do not receive wages and everyday government bureaucracy and services grind to a halt.
- During shutdowns, no social security or pension payments are issued.
- The U.S. Treasury is forced to cover the cost of essential services like police, schooling, and domestic security, using incoming revenue. (Which it is not possible during a prolonged shutdown.)
- The value of government bonds can plummet. This can cause international investors to dump bonds. In turn, this can diminish the value of the U.S. Dollar.
Business lending, equity markets, and commodity markets can all start to panic during government shutdowns. For this reason, it is imperative that the U.S. debt ceiling is raised prior to September. If it is not, lawmakers will have mere days to avert a crisis, as they return from summer recess.
Why is the Debt Ceiling Crisis Good for Cryptocurrency?
At present, lawmakers in the U.S. are due to recess for summer on July 26th. If no agreement to raise the debt ceiling by this time is forthcoming, a government shutdown in September is highly likely.
A shutdown will adversely affect the global bond market. It is, therefore, very likely that smart investors will attempt to safeguard their wealth beforehand. Moreover, Bitcoin and other cryptocurrencies are currently one of the best ways to do this.
Naturally, no one can say for certain whether people will start to use crypto to protect their wealth in the event of a government shutdown. However, if the debt ceiling isn’t raised by July 26th, this is will become a strong possibility.
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