Salam Alaikum,
Some of you may have seen talks in the news about the debt ceiling so I thought it would be interesting to explain what's going on and to help you understand how the system is a joke.
What's this debt ceiling everyone is worried about?
Let me explain why it's nonsense and how politicians keep taking you for a spin.
The system's a joke but every so often they'll keep you on your toes. Like a Christopher Nolan movie - but a sh*t version.
Think of the debt ceiling as the limit on a credit card. This is the max amount the US govt can borrow which is set by Congress. The current limit is $31.4trn.
Congress is made up of both Republicans/Democrats so some concessions will need to be made.
The US has reached the debt ceiling many times before. And every time, at the very end, the ceiling is raised.
Politicians will tussle until each party gets what they want. A party that controls congress will happily blackmail the other. But that's just politics...
Everyone's "panicking" because the US has bills to pay.
The govt has a ton of debt that needs to be paid back. But they'll never use cash to pay them off. Hello no. They just borrow more to pay off the old debt.
That's why the debt ceiling has to be raised. Smells a bit like a ponzi...
Markets are in a frenzy because many investors hold US govt debt.
If debt ceiling isn't raised:
- govt can't borrow more- govt can't pay back old debtholders- govt defaults on debt
If govt defaults then the world is screwed. US debt is considered the safest asset.
But that won't happen.
The whole financial system is underpinned by US debt, so it won't get to that stage.
They'll make you think it will.
Best case: they'll agree to a deal and raise the ceiling.
Worst case: they'll just extend the deadline until an agreement is made.
---------------------------------------------
If you enjoyed, please give me a follow as I plan to share more. I'm on here, on twitter @ secmuslimbanker and I will be launching my brand new website posting long articles on islamic finance and the financial market from a muslim perspective.
https://preview.redd.it/07nhn4ve312...bp&s=9aaf59deeb628cf5a6f10553c1c13d8a20bbcc3a
Some of you may have seen talks in the news about the debt ceiling so I thought it would be interesting to explain what's going on and to help you understand how the system is a joke.
What's this debt ceiling everyone is worried about?
Let me explain why it's nonsense and how politicians keep taking you for a spin.
The system's a joke but every so often they'll keep you on your toes. Like a Christopher Nolan movie - but a sh*t version.
Think of the debt ceiling as the limit on a credit card. This is the max amount the US govt can borrow which is set by Congress. The current limit is $31.4trn.
Congress is made up of both Republicans/Democrats so some concessions will need to be made.
The US has reached the debt ceiling many times before. And every time, at the very end, the ceiling is raised.
Politicians will tussle until each party gets what they want. A party that controls congress will happily blackmail the other. But that's just politics...
Everyone's "panicking" because the US has bills to pay.
The govt has a ton of debt that needs to be paid back. But they'll never use cash to pay them off. Hello no. They just borrow more to pay off the old debt.
That's why the debt ceiling has to be raised. Smells a bit like a ponzi...
Markets are in a frenzy because many investors hold US govt debt.
If debt ceiling isn't raised:
- govt can't borrow more- govt can't pay back old debtholders- govt defaults on debt
If govt defaults then the world is screwed. US debt is considered the safest asset.
But that won't happen.
The whole financial system is underpinned by US debt, so it won't get to that stage.
They'll make you think it will.
Best case: they'll agree to a deal and raise the ceiling.
Worst case: they'll just extend the deadline until an agreement is made.
---------------------------------------------
If you enjoyed, please give me a follow as I plan to share more. I'm on here, on twitter @ secmuslimbanker and I will be launching my brand new website posting long articles on islamic finance and the financial market from a muslim perspective.
https://preview.redd.it/07nhn4ve312...bp&s=9aaf59deeb628cf5a6f10553c1c13d8a20bbcc3a