The expert warned of global risks in the event of a US default

The growth of the US national debt will not lead to a full-scale default in 2025, but a technical default remains theoretically possible. Evgeny Shatov, a partner at Capital Lab, told Izvestia about this on August 5, commenting on the situation in the American debt market.

According to the expert, a default without raising the debt ceiling could occur between July and October 2025, since by that time the US Treasury Department would have run out of emergency measures. He called the political deadlock in Congress the main risk. The agreement to lift the debt ceiling in 2023 was reached at the last moment. Now the administration of US President Donald Trump again needs a compromise, but Republicans criticize the previous agreements, which complicates negotiations.

Shatov noted that historically, the United States has avoided default, even in crisis situations: over the past 40 years, the debt ceiling has been raised more than 60 times. In 2011 and 2023, this was accompanied by a credit rating downgrade, but payments continued. He added that since January 2025, the Ministry of Finance has been using emergency measures such as freezing pension funds, but US Treasury Secretary Scott Bessent recognizes the "inevitable uncertainty" of such steps. According to Shatov, the probability of a technical default remains low — less than 10% — due to the existing mechanisms and consensus at a critical moment.

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When asked about the reasons for sustained confidence in the American economy, despite the $37 trillion debt (about 125% of GDP), the expert pointed to four key factors. First, the dollar remains the world's reserve currency, and about 60% of global reserves are denominated in it, which allows the Fed to buy government bonds and reduce risks. Secondly, the US bond market is the most liquid and predictable in the world. Thirdly, investors are attracted by the US legal system and the history of debt fulfillment. Fourth, against the background of geopolitical crises, capital flows into treasuries as a safe asset.

"In 2024, this supported demand even with 10-year bond yields of 4.4–4.7%. The paradox of trust is that the US debt is growing, but interest costs ($882 billion in 2024) are still covered by tax revenues and new loans. Investors view this as the least risk in the absence of comparable alternatives," Shatov said.

The expert warned that a US default, if it occurs, will lead to a global cascading crisis. As he clarified, there will be a collapse of global markets — treasuries are considered a risk-free asset. Their devaluation will cause panic, the indices may fall by 20-30%. A crisis of the dollar system is also possible and a sharp weakening of the dollar by 15-25%, which will lead to an acceleration of inflation in the United States and a decrease in imports. In parallel, there will be a recession in the United States and a global recession, as the shutdown of social payments and government orders will hit consumption.

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Why are they talking about problems with its maintenance in the United States again and what will happen to the American economy?

"Commodity-based economies will also suffer significantly due to the fall in oil prices to $50/barrel and below due to reduced demand. For Russia, this means lower budget revenues and a weaker ruble, despite a short-term appreciation against the dollar. Ultimately, this situation could trigger a debt crisis in developing countries: the Fed's rate hike to protect the dollar will increase the cost of servicing foreign loans (for example, for Argentina or Egypt), which will trigger a wave of defaults," he added.

According to Shatov, the US debt remains a serious challenge to global financial stability. However, political will and emergency financing mechanisms remain key factors against default. At the same time, he stressed that diversification of reserves is necessary to reduce global risks, and the United States should reform fiscal policy.

On July 25, it was reported that any attempt to limit the independence of the US Federal Reserve would "have a very bad effect on the markets." It is noted that markets value the independence of central banks, especially in setting interest rates.

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