Thread by @Abhishe27960014

🌟"The US Debt Crisis Explained in Layman"🌟

Hey, Twitter fam! 👋

Let's talk about a topic that affects not just the US but the entire global economy: the US debt crisis. 🌐💼

[THREAD]🧵👇

#DebtCeiling #UsDebtCeiling #DebtLimit

1) First things first: What is the meaning of Debt?

Debt means a loan.

We've all been there, borrowing money from a friend and promising to pay it back with a little extra, right?

Well, it's no different for governments. In this case, we're talking about the national debt.

2) But why does the government need to raise debt?

Our government spends money on various important things like infra projects, social welfare, and developing roads, among others.

And while it mainly gets its revenue from taxes, sometimes the spending exceeds the income.

When that happens, a loan or debt needs to be taken to bridge the gap. 💡🏗️💵

The national debt represents the amount of money that the US federal government has borrowed over time to cover its expenses.

3) So, how does the US government raise debt?

They do it by selling Treasury securities, such as Treasury bills, notes, and bonds, to investors.

These securities have different maturities ranging from a few days to as long as 30 years.

It's like our government is borrowing money and giving investors an opportunity to invest in its financial future. 💸📈

4) Who holds this debt?

The Federal Reserve is the largest holder, owning almost 20% of it.

The rest is held by public investors and intergovernmental funds.

It's a complex web of financial relationships that shapes the dynamics of our economy. 🕸️💼

5) Now, let's dive into the numbers.

The current US debt stands at a staggering $31+ trillion, which is the maximum approved by the US Congress.

If the government wants to take on more debt, it has to be approved by Congress, and that's where the challenge lies. 😮🗽

The US government has to pay approx $395 billion annually just to cover the interest.

That's a substantial chunk of our tax dollars going toward servicing debt.

6) Now, What is the problem with this debt?

i} One of the primary problems with this mounting debt is the interest payments.

The yearly interest payments on this debt are almost 7-8% of yearly US government spending.

This is not a small proportion in any way.

The US is now in a vicious cycle where more debt is needed to make these interest payments and survive its economy.

ii) Another crucial issue is the threat of default.

Currently, the US government has reached its debt limit, and without an increase approved by Congress, there's a real risk of defaulting on the debt.

While the chances of Congress not approving the increase are slim, we can never completely rule it out.

This ongoing standoff between Republicans and Democrats highlights the need for a bipartisan solution to avoid such a catastrophe. 🚫🤝

7) As professionals, it's crucial for us to stay informed and engaged in discussions about the US debt crisis.

What are your thoughts on the US debt crisis?

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