In part one of this series, we learned why the debt ceiling has no big deal, but this time might be different. In fact, analysts and economists believe the debt ceiling is currently the single biggest risk to the stock market.
Now let’s look at the two most important facts about the debt ceiling, and why it could potentially trigger a December 2018 style market crash, and how you can not only avoid losing money but possibly make a fortune from a short-term market freakout.
Fact 3: Why This Could Trigger Another Great Recession
The US government has never defaulted on its debt and that’s why US treasuries are the most popular “risk-free” asset on earth. Since the late 1940s, much of the global economy has been built around the risk-free nature of US bonds, and now we have $80 billion in liabilities coming due in the second half of October alone.
Every day the US government has money flowing in through things like payroll taxes and estimated tax payments from small businesses and corporations.
And every day the government is paying bills, to people like contractors, employees, and social security recipients.
The Treasury Department is in charge of making sure the government always pays its bills on time but Secretary of the Treasury Janet Yellen has warned that by mid-October the government might have to start defaulting on its liabilities.
That will create some very big problems because as we proceed further beyond the drop-dead date, more and more people won’t get the money that’s owed them.
For example, veteran pensions could be disrupted, social security payments could be missed, and Federal employees might not get paid, the same with contractors.
During government shutdowns, social security and veteran pensions are funded from separate sources and have never been disrupted. This time they might be.