The US government managed to avert a historic national debt default, passing legislation backed by President Joe Biden that lifts the government's debt ceiling. At the same time, some publications continue to speculate on what would happen if Congress and the president did not reach a deal on a new debt limit. Imagine that the US eventually falls into the void of debt default. The US dollar’s appeal and the US economy will be seriously undermined by the White House's failure to meet its debt obligations. Recently, the national debt limit was $31.46 trillion, the maximum amount the government could borrow. Exceeding the limit would mean a default on the national debt, a financial crisis, an economic downturn, unemployment growth, the shutdown of some government agencies, a possible suspension of Medicare payments, and, theoretically, downgrades of the US AAA/AA+ sovereign debt rating. It goes without saying that if the US had defaulted, the greenback would have been hit hard. However, an alternative to the US currency is unlikely to emerge soon. "While a rapid shift away from the US dollar is not likely in the short term, the trend is not Washington’s friend. A sovereign default caused by a lack of political will as opposed to capacity to pay would certainly fuel the momentum to dollar dethronement. With that would come the end of Washington’s ability to endlessly print money in the form of US Treasuries and other securities. Although this issue is hard to translate into the day-to-day living of Americans, it matters. China, Russia, South Africa, and several other countries have already begun to conduct part of their trade in other currencies," Scott MacDonald, the Chief Economist for Smith’s Research & Gradings, writes.
