With all the talks we hear about the debt limits, it is easy to lose sight of the facts in the midst of so many conflicting stories. Review the facts and then decide how the government can appropriately raise the debt limit. For our sakes, let’s hope Congress can work out a plan by August 2, 2011. Currently the federal government owes 14.27 trillion dollars to various entities. China is the biggest lender to the US government at 1.152 trillion dollars. Congressional Quarterly has a good summary of the national debt.
This debate about the debt limits makes me nervous because if the US government defaults on its debt obligations, the impact could have a detrimental effect on our already flimsy economy. The likelihood of a rise in interest rate is high. That means the cost of borrowing to finance a house, buy a car, and credit card debt will take a hike. If we are currently struggle to pay for our debts, the hike in interest rate will continue to prolong our debt position. This is a strong endorsement for all of us to strengthen our personal finance position so that we can weather the unexpected.