The “most powerful nation on Earth” is two weeks away from defaulting on it’s debt

Let me start this by stating the obvious : the United States dollars is the most stable and widely used state-backed currency. This post isn’t arguing that it will disappear anytime soon.

But I think most of us don’t realize yet how close to disaster the US are right now. The country is literally two weeks away from defaulting on it’s debt, which could have major repercussions on it’s financial reputation and stability.

What’s going on? Well, this crisis is entirely political. The US Congress enacted several decades ago a dumb law that creates a “debt ceiling”. The government can’t borrow more money then authorized by the ceiling ; therefore, every once in a while, Democrats and Republicans get to fight around this issue. Usually, the minority will try to extract concessions from the party in power ; that’s what’s happening right now.

The current debt limit will be hit around December 17th. If there isn’t an agreement between Democrats and Republicans before this, the US will default it’s debt for the first time in history (excluding defaults on gold bonds, demand notes or silver certificate paper dollars).

The repercussions of such a default would be huge. Here’s what The Conversation hard to say about this scenario :

Investors such as pension funds and banks holding U.S. debt could fail. Tens of millions of Americans and thousands of companies that depend on government support could suffer. The dollar’s value could collapse, and the U.S. economy would most likely sink back into recession.

Now, is this scenario likely? I will be honest here : no. In all likelihood, the crisis will be averted this time, as it has been multiple times before. But the core conclusion remains : the US dollar is weaker then most of us are willing to admit. A simple political fight could send it’s value down and have a devastating effect on the economy.

For this reason, I think it’s a good idea to hold at least some crypto assets in a private wallet over which you have full control. If such a black swan event was to happen, you’d be more prepared then the majority of the country.

For those interested in reading more, here’s the article I quoted above.