![]() If the US government were to default on its obligations, it would quickly have a major financial impact on tens of millions of Americans.Ībout 66 million retirees, disabled workers and others receive monthly Social Security benefits. Corporate America, Main Street, all of it could be affected.” “From our own knowledge and oversight of the banking system, we know that everyone is extremely concerned. Every family should be concerned,” he said. “A lot of things we assume are part of our financial fabric would get ripped away,” Rohit Chopra, director of the Consumer Financial Protection Bureau, told CNN in an interview on Thursday. Home buying costs could spike by 22% if US defaults on its debt Photographer: Kyle Grillot/Bloomberg Kyle Grillot/Bloomberg/Getty Images Some 200 homes under construction in California come with solar panels, heat pumps and batteries, forming microgrids that cut energy costs and emissions. Model homes at a KB Home development in Menifee, California, US, on Wednesday, Nov. California would lose 841,600 jobs, Texas would shed 561,700 jobs and there would be 474,700 jobs lost in Florida.Īnd the housing market would not be spared by the “economic calamity” of a US government default, as Yellen once described it.Ī new analysis from Zillow estimated that housing costs would soar by 22%, with the rate for 30-year, fixed rate mortgages rising above 8%, and existing home sales would fall by 23% at their lowest point if there is debt default. In a scenario in which the government’s default persists for months, that could mean 7.4 million job losses in the United States, according to Moody’s Analytics. And it would spark a global downturn that would set us back much further,” Treasury Secretary Janet Yellen said Thursday in Japan, where she is attending a meeting of G7 finance ministers and central bankers. “A default would threaten the gains that we’ve worked so hard to make over the past few years in our pandemic recovery. The broadest economic impact of a US debt default would be a recession that would encompass the global economy, including sharp job losses. “Such financial market disruptions would very likely be coupled with declines in the price of equities, a loss of consumer and business confidence, and a contraction in access to private credit markets.”Īmericans’ investments would take a major hit as stocks lose as much as a third of their value, wiping out around $12 trillion in household wealth, according to Moody’s Analytics. ![]() “Worsening expectations regarding a possible default would make significant disruptions in financial markets increasingly probable,” Wendy Edelberg and Louise Sheiner of the Brookings Institution wrote in an analysis. That leaves Americans having to pay more to borrow - on top of the Federal Reserve’s own rate hikes. Borrowing costs for credit card rates and mortgage rates would spike, since US debt serves as a critical benchmark for various forms of debt. Yields on Treasury bills for early June, when the Treasury Department could exhaust its cash and extraordinary measures, have soared this month. Except, some market tensions have already manifested. Investors care about stability and predictability, so a credit rating downgrade would send a chill down Wall Street’s spine. The federal government maintains a perfect credit rating from Fitch and Moody’s, but that could change as the stalemate drags on. In that instance, S&P Global Ratings credit rating agency downgraded the government from AAA to AA+ credit rating. The United States was in a similar situation in 2011 when it got close to defaulting. ![]() If the United States defaults on its debt, it would undermine faith in the federal government’s ability to pay all its bills on time, affecting the government’s credit rating and unleashing massive turbulence in financial markets. These states will be hit the hardest if the US debt ceiling standoff isn't resolved US authorities took extraordinary measures to shore up confidence in the financial system after the collapse of Silicon Valley Bank, introducing a new backstop for banks that Federal Reserve officials said was big enough to protect the entire nation's deposits. The US Treasury building in Washington, DC, US, on Monday, March 13, 2023.
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