Could a US debt default unleash global chaos?

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The US government is currently engaged in what could be one of the most costly games of chicken in history.

If Democrats and Republicans do not agree to allow the US to borrow more – or, in their language, raise the debt ceiling – the world’s biggest economy will default on its $31.4 trillion (£25tn) debt.

They have to reach an agreement by the ominous sounding “X-date” of 1 June.

But if they don’t, what could that mean for other countries – and you?

First things first: all the experts the BBC spoke to do not think the US will default on its debt.

However, if it did, “it would make the global financial crisis look like a tea party”, says Simon French, chief economist at investment bank Panmure Gordon, referring to the near collapse of the world’s banking industry in 2008.

If the US does not lift its debt ceiling, it will not be able to borrow more money – and it will quickly run out of funds to pay for public benefits and other obligations.

Full article here:

Simon French

Managing Director, Head of Research

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