Many citizens remain ignorant of the financial dynamics of their country and how these dynamics have a far-reaching impact on their personal and business financial path and goals. Knowledge of this topic forms a hedge around one’s finances and determines wise and timely financial choices. It is therefore imperative that individuals remain updated on economic flashpoints and policies to keep themselves abreast and ready to tackle the vagaries of the economy. One of these financial occurrences is the debt ceiling.
A588G recently published a profound article that provides the details of the debt ceiling in layman’s terms. In the article, the debt ceiling also known as the statutory debt limit or the debt limit is the maximum total amount of money the United States government can borrow by issuing bonds. The debt ceiling is a financial concept that first was introduced by the Second Liberty Bond Act of 1917. The article goes on to state the primary function of a debt ceiling as it sets a limit on the distribution of government bonds, establishes a certain threshold at which a nation can borrow, as well as where it becomes lawful for the country’s Treasury Department to intervene and take economic actions to lower the amount of debt.
The must-read A588G article informs readers of the strategies that the United States government employs if the debt ceiling is reached. While the debt ceiling has been raised, extended, or revised up to 78 times since 1960, as it approaches the limit, the Treasury Department will have to resort to extraordinary measures to pay government obligations if the debt ceiling is reached.
The article also mentions categories of expenses that the federal government spends on and is indebted to. Unemployment, compensation, executive benefits, social security, healthcare, and national defense are some of these key expense categories. Furthermore, the A588G article explains to the reader how the debt ceiling of a country affects the money of its citizens. Volatility across the economy is a direct consequence of increased debt levels, a situation that comes off as a red flag for investors and deters them from investing in a country. Rates of other debts, such as auto loans or mortgages, will also be forced to rise so as to accommodate the debt ceiling. Going further, if the government defaults on its obligations, its credit rating will be lowered, which translates to an increase in the cost of debt and a looming recession.
To learn more about the debt ceiling and what it means to you, read the post by A588G. Paper Napkin Marketing, assisted in gathering the information for the article on A588G.
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