The United States is rapidly running out of money to pay its bills unless the Republicans and Democrats can agree on a new deal. Here's how the US got here, and what it means for Australia.
"The United States [would cease] to be able to pay its bills, so it defaults on its obligations, and that would be a huge problem for financial markets, because the United States is the world's benchmark for credit worthiness," Mr Picton said.
"Time is running out. Every single day that Congress does not act, we are experiencing increased economic costs that could slow down the US economy."Analysis by ANZ Research suggests that the US Treasury would prioritise making interest payments to avoid defaulting on its debt, and agrees that a default would be "catastrophic", although it says the probability of that occurring is very unlikely.
That resulted in close to 1 million workers being laid off, and negatively affected several sectors of the US economy. During Donald Trump's four years as president — who also cut taxes during his time in office — the debt limit was also increased three times. "But we really can't dismiss the risk of them not doing that in time and cause this fairly horrendous event to occur."
"But, bigger than that, bondholders around the world would not be paid the interest on their security for a period of time, and that would reverberate around financial markets. He expects that it would initially be more challenging for banks to borrow from overseas, which could result in higher interest rates.
If a deal is not reached to raise the debt ceiling, some analysts say the US central bank, the Federal Reserve, will intervene and follow the blueprint it created in 2011.
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