Debt Limit Negotiations Resume as U.S Default Risk Increases

• The Treasury Department is taking measures to avert an unprecedented default.
• High volatility is expected in both the stock market and the crypto sector upon default.

Debt limit negotiations, which were fruitless on Monday, will be resumed on Tuesday between President Joe Biden and leading Republican Kevin McCarthy.

The Treasury Department is taking measures to avert an unprecedented default, such as probing government agencies about the flexibility of impending payments, as the likelihood of the United States defaulting on its debt rises.

The White House is scrambling to find ways to delay the deadline so that President Biden and House Speaker Kevin McCarthy can negotiate an increase in the debt limit since that date is less than two weeks away.

All Eyes on Possible Extension

Early in June, the federal government might potentially miss a payment for the first time in modern history if measures are not taken to boost borrowing, increase tax collection, or reduce expenditure. The Treasury has reportedly sought out other government departments to see if they can defer payments that are due before the beginning of June.

It should be noted, however, that the Treasury has not asked any government agencies to extend payment deadlines. In a document sent out earlier this week, top Treasury Department officials instructed federal agencies to take certain new measures to keep Treasury carefully informed of their expenditures.

It’s possible that the default deadline may be pushed out into July if payments were delayed until June 15, when a large number of quarterly tax payments are due to appear in the Treasury’s records.

In order to prevent default in the near future, this would pave the way for a new set of accounting methods. High volatility is expected in both the stock market and crypto sector if the U.S. fails to make the payment.