IF THE US DEFAULTS, THERE ARE 7 CONSEQUENCES

The stock market is on fire, the economy is collapsing, governments are shutting down, and the world is in jeopardy if the United States defaults on its debt.

Leaders in the United States Congress and the White House are attempting to negotiate an agreement to raise the public debt ceiling before the Treasury Department runs out of options to avoid an unprecedented US government default.

Economists and financial experts anticipate catastrophe if they fail and the government is unable to pay its debts as they become due. ?It has the potential to spread and undermine the entire financial system, ultimately wrecking the economy,? said Moody's chief economist Mark Zandi.

Stocks plunge

The financial market has not changed much as a result of the public debt ceiling impasse. The cost of hedging against the US government's default has risen, suggesting concerns about its ability to repay. However, most houses are unaffected by the tremors.

That will alter as the government approaches default. According to experts, the shock of default would spread across the financial system - equities, bonds, mutual funds, and derivatives - before affecting the overall economy.

Wall Street will most likely be the first victims. Stock prices will plummet in anticipation of a larger recession, as interest rates rise and investors withdraw funds from the market to maintain short-term cash access.

Sudden recession

If the deadlock persists, the impact will quickly spread from financial markets to the broader economy. The drop in household wealth across the country - due to a sell-off in stocks - will dampen spending power, hurting businesses.

The Zillow report predicts default will push mortgage rates above 8% and home sales down 23%. Construction and other sectors will be implicated.

The most dramatic impact could be the halting of regular federal payments to tens of millions of American families, including seniors who receive health insurance - Medicare, Social Security, and those who rely on it. on food stamps.

Of course, not all the money goes directly to households, but it's a huge amount that disappears from the economy overnight.

The Finance Ministry said the public debt ceiling deadlock in 2011 caused a $2.4 trillion loss in total household wealth.

U.S. government closed.

The US government has a shutdown process when Congress fails to pass a new budget. Agencies with unapproved spending will give workers leave. Some ?essential? employees will continue to work without pay. There have been three closures lasting at least one day in the past decade.

However, experts say that closure because of default may not be like that, without precedent.

Global economy is contagious

Many countries protect their finances by buying large amounts of US government bonds, in the belief that they are among the safest assets in the world. But defaults can reduce the value of those bonds, hurting the reserves of many countries.

Economists fear that will further confuse countries already steeped in debt - like Sri Lanka and Pakistan.

USD and prestige of the US fell

Financial experts have been watching for some early signs that the world economy is starting to reduce its reliance on the USD. Some countries like Brazil and Malaysia are calling for more frequent transactions in other currencies. 60% of foreign currency transactions still take place in USD, but US defaults - which can cause the value of the greenback to plunge - and change that.

?This risks undermining US global economic leadership and raises questions about our ability to protect our national security interests,? Janet Yellen said of the default scenario. last week.

Experts say a default could also hurt the US's standing on the world stage, thus being the result of political turmoil within the country.

Social Security programs are delayed.

More than 60 million Americans receive monthly ?Social Security? benefits, mostly seniors. The same number depends on ?Medicare? for health insurance.

But budget experts doubt the Treasury's ability to pay benefits on time if defaults drag on for weeks or months.

If the government continues to spend on social security with the tax revenue coming, it is likely to have to choose between this and paying off the debt.

US borrowing costs soar.

The US government can borrow at low interest rates because no one thinks the world's number one economy will be late for repayment. The safety of US government bonds has made it an essential foundation in the world financial system.

If it defaults, the cheap borrowing costs enjoyed by the US for decades could come to an end, economists say.