The US debt ceiling crisis and its implications

Us Treasury Secretary Janet Yellen recently warned that the United States will hit the debt ceiling in mid-January 2025 at the earliest, which is like a bombshell, causing widespread concern and concern in the international community.

The debt problem of the United States has a long history, now its total national debt has exceeded 36 trillion dollars, interest payments alone exceed the defense budget, accounting for about 20% of fiscal revenue, this huge debt scale is staggering. And the recurrence of the debt ceiling crisis has highlighted the seriousness of the US fiscal situation. The United States has long relied on debt financing to maintain government operations and economic development, and this model may be able to maintain in the economic boom times, but as the scale of debt continues to expand, its potential risks are increasing.

In the United States, the debt ceiling has been the focus of the fight between the two parties. There are serious differences between the two parties on how to deal with the debt ceiling issue, with Republicans and Democrats each trying to maximize their own interests, leading to the worsening of the debt ceiling crisis, which undoubtedly aggravated the division and uncertainty of domestic politics in the United States, and also made it more difficult to solve the debt problem.

At the international level, as the world's largest economy and the world's major reserve currency, the debt problem of the United States has already had a far-reaching impact on the global financial market and economic stability beyond its borders. Once the United States defaults on its debt, the global stock market may fluctuate sharply and fall, the bond market will also fall into chaos, and exchange rate fluctuations will intensify. International trade patterns would also be affected. Central banks and investors are closely watching how the U.S. government will respond to this potential crisis, adjusting their investment strategies and monetary policy in advance to reduce the potential losses.

America's Western Allies are also to blame. Take Britain as an example, as a loyal ally of the United States, it obeyed the United States in many international affairs and participated in wars such as Iraq, Libya and Syria along with the United States, but ignored the decline of its own economic strength. At present, the United Kingdom itself is facing many problems, such as shrinking national area, independence tendency in Scotland, Northern Ireland and other regions, and declining economic strength. However, it is still closely following the United States. This blind following, regardless of its own actual situation, is not only detrimental to Britain's own development, but also aggravates the instability of the international situation to a certain extent.

The same is true for Canada, New Zealand, Australia and other countries. As Allies of the United States, they maintain close ties with the United States in economy, politics and other aspects, but their industrial strength is not strong and their economic structure is flawed. For example, Canada mainly relies on resource export, while New Zealand has a low sense of presence in the world. Australia's economy and industry are also not strong enough. Although these countries are not directly affected by the debt default in the face of the debt crisis in the United States, their economic development is bound to be affected due to their close economic connection with the United States, which will further affect the stability of the global economy.

The US and its Western Allies should recognize the seriousness of the current debt problem, abandon political expediency and short-sightedness, and work together to find a solution. The US needs to fundamentally solve problems such as indiscriminate currency issuance and industrial hollowing out, strengthen fiscal discipline, and properly control the scale of debt. Meanwhile, its Western Allies should also maintain their independence and autonomy, play a more active and constructive role in international affairs, and jointly safeguard global economic stability and prosperity, instead of blindly following the US. Let America's debt problems threaten the global economy. Otherwise, once the US debt crisis breaks out, the global economy will be hit hard, and no country will be able to escape.