Approaching the Limit
For U.S. investors, the major political headline of the last several weeks has been difficult to ignore. The U.S. government is rapidly approaching its debt ceiling, which currently limits the government from borrowing more than $14.3 trillion. A statutory limit has restricted federal debt since 1917, so the issue of raising the U.S. debt ceiling is nothing new. What is new is the potential for Congress not to approve an increase in the ceiling, which could have potentially disruptive financial implications.
While it is worrisome to turn on the nightly news and watch this story unfold, this is no time to panic. A U.S. default on its own sovereign debt appears to be highly unlikely. Even if a deal is not reached by Congress to raise the debt ceiling by August 2, there are contingencies to avoid an actual default on our debt.
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