US: What’s Behind the Debt Ceiling Controversy

On June 1, the US government could default. A political battle has erupted in DC over whether — and how — the crisis can be resolved. Consequences: Disaster.

New York/Washington, DC An uneasy calm before the storm. That’s how America was in the banking crisis on Monday — after the collapse of Silicon Valley Bank, JPMorgan Chase took over Republic Bank. “There’s a tendency to breathe a sigh of relief on a morning like this,” David Hunt, CEO of investment firm PGIM, told Politico on Tuesday. But: “Really, this is just the beginning.”

He agrees with many that the US and its financial markets continue to navigate rough waters. In addition to the banks, there is also the unresolved issue of the US federal government’s solvency. Treasury Secretary Janet Yellen said on Monday that the US could run out of money on June 1. Democrats and Republicans have yet to agree on a plan to raise the debt ceiling. A bankruptcy like this has never been seen before – and what it means for the US and global markets is beyond imagination.