US Default: Threat to 83 lakh jobs, half the stock market will sink… Shocking news coming from America – debt default could wipe out 8 million jobs, plunge stock market white house warns
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The debt limit is the limit up to which the federal government can borrow. Since 1960, this limit has been increased 78 times. Last time it was increased to $ 31.4 trillion in December 2021. But it has gone beyond this limit. According to a blog post by the White House Council of Economic Advisers, if the debt ceiling is not raised, the country will be doomed. White House economists said that a protracted default would cause huge damage to the economy. The boom in job growth that is being seen now will be derailed. Lakhs of jobs will be lost. These economists have estimated the impact on the economy in three scenarios. These include brinkmanship, short default and prolonged default.
what will be the effect
Default can be avoided in case of Brinkmanship. But this would result in the loss of 200,000 jobs and could lead to a 0.3 per cent drop in annual GDP. In the event of a short default, about 500,000 people will be unemployed and the unemployment rate will increase by 0.3 percent. White House economists say the worst-case scenario is a protracted default. In this, 83 lakh jobs will be lost, GDP will fall by 6.1 percent and the stock market will be half cleared. In this situation, the unemployment rate will increase by five percent. That means an army of unemployed will stand in the country. A White House spokesman said that in the event of a protracted default, the impasse could last up to three months. Earlier, Moody’s Analytics had also made a similar estimate in March. He said that in the event of a long default, more than 7 million jobs in America could fall.
The US has never defaulted so far, so it cannot be said for sure what its effect will be. According to Moody’s Analytics Chief Economist Mark Zandi, if America defaults, millions of people may lose their jobs and the country may be in the grip of recession. Due to this, 70 lakh people can lose their jobs and the country can get trapped in financial crisis like 2008. In 2011, the US was on the brink of default and the US government’s perfect AAA credit rating was downgraded for the first time. This led to a huge decline in the US stock market, which was the worst week since the 2008 financial crisis.
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if defaulted
If the US defaults on debt payments, all outstanding series of bonds will be affected. These include bonds issued in global capital markets, government to government credit, foreign currency denominated loan agreements with commercial banks and institutional lenders. Along with this, the payment made by the government and government institutions will also be affected. If a country defaults, it can be prevented from raising money from the bond market. Especially until the default is resolved and investors are convinced that the government has the willingness and ability to pay.
Countries have several options in case of default. Sometimes the loan is restructured. That is, its due date is extended further. Similarly, to make the currency more affordable, it is devalued. After being a defaulter, many countries take various measures to spend. For example, if a country devalues its currency to repay its debt, then its products become cheaper to export. This benefits the manufacturing industry, which boosts the economy and makes loan repayment easier.
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