Expert predicts the end of the US financial system if the US refrains from raising the debt ceiling

Refraining from raising the national debt ceiling will lead to the end of the US financial system. In the future, it will provoke the weakening of the dollar and the loss of its role as a reserve currency. This opinion was expressed by Maxim Chirkov, Associate Professor of the Department of Economic Policy and Economic Measurements of GUU, in a conversation with "Izvestia" on December 20.

Earlier, U.S. President-elect Donald Trump demanded from the Democrats to eliminate the ceiling of the U.S. national debt or significantly increase its level. He linked the importance of this issue to the upcoming vote in the US Congress on the adoption of a temporary funding resolution for the US government. In his opinion, without it, the United States will face a shutdown as early as January 20.

At the same time on December 19 in the U.S. Congress did not pass a bill to extend the funding of the government and raise the ceiling of the national debt. In support of the document were 174 members of the lower house of Congress, while 235 spoke against.

Chirkov recalled that the situation that arose in the United States in connection with the refusal to raise the debt ceiling occurs regularly. Contradictions will be eliminated, because the U.S. currently has no other tools for additional financing of its expenditures, except for the increase in the ceiling of the national debt. Americans are "spending far more than they can afford on their budget revenues."

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"The issue of raising the debt ceiling comes up from time to time. All members of the American establishment realize that it is necessary, because otherwise the consequences of the shutdown will be much worse than many people think. That is, it will mean not only the suspension of payments on some expenditures, suspension of payments to government officials, but it will also raise questions about the prospects for the existence of the American financial system. It is clear that the U.S. is the country most mired in debt of any country in the world. A refusal to raise the public debt ceiling for the world's financial market players could be interpreted as the Americans refusing to service their government securities, i.e. bonds. This could lead to a serious panic in the world markets," the expert warned.

According to him, the government debt ceiling will be raised in any case, otherwise the American financial system will not be able to exist. The reverse decision may also lead to a weakening of the dollar and its loss of the role of reserve currency.

Earlier, on December 11, the U.S. Budget and Accounting Office (GAO) noted that Congress should immediately abolish the statutory ceiling on the national debt, tying the amount of borrowing to changes in government revenues and expenditures.

The next day, financial analyst Vladimir Levchenko told Izvestia that the US government debt will continue to grow. According to him, Washington has no options but default. The country keeps raising the state debt ceiling. As the expert pointed out, devaluation will not help the state in any way, because it will also lead to default.

Specialists of the International Monetary Fund (IMF) back in June called the growth of the U.S. national debt a threat to the global economy. Thus, by 2032, the country's national debt may exceed 140% of GDP. The IMF urged American politicians to carefully consider raising indirect taxes and gradually increasing income tax.