The US House finalized a bill to suspend the debt ceiling on Wednesday, just days left before the country was expected to default. What comes next for the national debt and financial markets?
With 149 Republicans and 165 Democrats supporting the measure, the US House has finally passed the bill regarding the national debt ceiling.
President Biden welcomed the House passage of the legislation and urged the Senate to take up the legislation to avoid a default expected in the nearest future. Previously, the treasury secretary, Janet Yellen, warned that the federal government will be unable to pay its bills starting 5 June without additional borrowing possibilities.
As we have reported earlier, the bill aimed at stopping the US government from defaulting on its debt would block previously proposed taxes, that may affect the digital asset space, including a 30% tax on crypto mining suggested as part of President Biden’s FY2024 budget.
However, the debt ceiling bill passed today would suspend the government’s borrowing limit until January 2025, ensuring the question of possible default will not come up again before the next presidential election.
Currently, the national debt of the US stands at more than $31 trillion. The increase over the last decade is huge. For comparison, the debt stood at a mere $9.7 trillion in 2008. The new deal is expected to boost US debt by over $4 trillion in the next few years. Meanwhile, analysts believe that the US debt will continue to soar, forecast to hit over $50 trillion by 2030.
Therefore, House Freedom Caucus members attempted to block the debt ceiling bill from advancing today. They say the deal fails to address the main reason for the national debt crisis: extraordinary spending levels. The bill opponents state that spending cuts included in the bill are not enough to avoid the default within the next decade.
Many experts believe there is a major risk that the US social security will run out of money sometime by 2034. Expectedly, the rising debt would also lead to an increasing gold and silver demand, as emerging markets would seek alternatives for USD for their reserves.
Moreover, a first-ever US debt default becomes a potential black swan event that could still happen in future. It would have a sizeable impact on Bitcoin, Ethereum, and the rest of the crypto market.
On one hand, these high-risk assets would likely decline, along with tech stocks as it typically happens during the crises. Nevertheless, if Bitcoin strengthens its status as the “digital gold” by that time, its value may bounce as soon as traditional markets and centrally managed financial systems are negatively affected by the potential default.