I’m a middle aged dude with a family, own a house, have four kids, investments, all the adulting things.
However, I’m still not sure how a multi-trillion dollar national defecit seeps down to affect my day-to-day life
In: 492
The “real world” consequences to you specifically would be in the form of potentially higher interest rates for your personal debt (mortgage, car loan, etc) and potentially lower valuation of your assets.
A country carrying an ever expanding national debt increases the risk that it may not be able to pay back the interest and principal. As this risk increases, future lenders may ask for a higher interest rate for making loans thus compounding the country’s credit risk. It works the same way as for an individual.
Historically and even today, the perceived risk of the US defaulting on its debt payments is low. However, it’s not a guaranteed law of nature that this perceived risk will remain low. The political environment, political stability, transparency and application of law & regulations that create a more attractive investment environment, and how the US spends its money will all affect this risk. (Ignoring many other factors)
If the US doesn’t strike the right balance between investing for a better future (i.e. economy) versus important and useful social programs that have a less obvious economic benefit, it’s perceived risk and hence the interest it pays to borrow will increase.
This will flow down to you in the form of higher and less stable interest rates and asset valuations.
Latest Answers