There is a looming problem in America, and it isn't the upcoming election next year. This problem is so massive, it reaches into unfathomable areas of debt. If the U.S. fails to raise the debt ceiling on June 1, they will default on many secured loans it offers.
For countries that rely on the greenback as the defacto trust currency (besides Gold), we have a problem here. And we know how volatile gold can be.
In 2011, the U.S. reached a crisis point of near default on public debt. The delay in raising the debt ceiling resulted in the first downgrade in the United States credit rating, a sharp drop in the stock market, and an increase in borrowing costs. Congress raised the debt limit with the Budget Control Act of 2011, which added to the fiscal cliff when the new ceiling was reached on December 31, 2012.
When the largest free economy in the world defaults, there's going to be a massive problem. People who rely on old age payments, benefits, and government workers will not be able to be paid. The stock market will likely tank, and tank very severely.
And people who say "Well, we should all just move to bitcoin" have absolutely no idea what they are talking about. Bitcoin does not represent tangible assets. Instead, you have a wallet code - and hope that you can keep this secret code "safe". And the 'repository' holding your bitcoin(s)? You better hope they have security like Ft. Knox.
Everyone remembers mt Gox? Let's go back in time, courtesy of Wikipedia:
Mt. Gox was a bitcoin exchange based in Shibuya, Tokyo, Japan. Launched in 2010, it was handling over 70% of all bitcoin (BTC) transactions worldwide by early 2014, when it abruptly ceased operations amid revelations of its involvement in the loss/theft of hundreds of thousands of bitcoins, then worth hundreds of millions in US dollars.
In February 2014, Mt. Gox suspended trading, closed its website and exchange service, and filed for bankruptcy protection from creditors. In April 2014, the company began liquidation proceedings. Although 200,000 bitcoins have since been "found", the reasons for the disappearance—theft, fraud, mismanagement, or a combination of these—were initially unclear. New evidence presented in April 2015 by Tokyo security company WizSec led them to conclude that "most or all of the missing bitcoins were stolen straight out of the Mt. Gox hot cryptocurrency wallet over time, beginning in late 2011."
But back to the U.S. debt. Undoubtedly, a new ceiling will be raised - even higher than ever. But when will this debt be paid back? Likely never.
Let's hope there's sensibility in the United States to get past this crisis before it gets out of control.
-Chris
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