![]() Moreover, our allies account for the majority of externally held US Treasuries. US bonds have been the world’s premier safe asset for decades, largely due to our reliable repayments, allowing us to borrow from domestic and overseas investors at highly favorable terms even at times of national crisis, such as the 2008 global financial crisis or the recent Covid-19 pandemic.Įven if the United States finds some way to “prioritize” paying allies first, defaulting on any of this debt would undermine the confidence of any country or investor who holds US bonds. There are few things that undermine people’s confidence in a partner’s stability and goodwill more than getting stiffed. If Congress doesn’t lift the debt ceiling, the US could default sometime between July and September, and possibly even sooner. ![]() Since the national debt hit its limit in January, the US Treasury has been taking extraordinary measures to cover these bond payments, but is quickly running out of options. US Treasury bonds are IOUs to people who have lent the US money. The Republican majority in the House would be doing Beijing and Moscow’s work for them if they refuse to raise the debt ceiling, sowing irreparable doubt among even our closest allies not just about US financial commitments, but about any promises we have made to other countries. Katheryn Russ Peterson Institute for International EconomicsĬhinese President Xi Jinping has lined up with Putin on that score, and the US military has warned that China’s parallel campaign of disinformation is intended to create “doubt amongst our allies and partners in the reliability of the United States.”
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