Why would personal loan interest rates go up if the US defaults on it’s debt.


Why would interest rates in personal loans like mortgages go up if the US defaults on the national debt. Why is my local bank affected by the government not being able to pay its debts.

In: 4

Long story short: correct me if I am wrong, but ELI5….

Banks borrow from the FED who sets rates to lend to banks, so if the government misses a bill payment then their credit rating goes down and people(banks other countries) look at the FED with a “side eye”.

Now they banks give out all kinds of loans on different timescales and rates; they can typically use the FED rates to judge what they can charge a customer. With everone looking at the FED like “ummmm…” their rates would likely go up, and then the banks pass that along to their customers.

The bank loans money from the government, but its a moot point as the U.S will not hit the debt ceiling. They will work it out at the 11th hour. Not doing so would instantly wreck the economy for both democrats and republicans, no one wins except russia and china, and R and D hate those guys even more than eachother