What happens if America defaults on its debt?

The American Constitution vests legislative power in Congress. Over the coming days, the political body may arrogate to itself a metaphysical power: transforming the utterly unthinkable into hard reality. By failing to raise America’s debt ceiling in time, Congress could drive the country into its first sovereign default in modern history. A collapse in stock markets, a surge in unemployment, panic throughout the global economy – all are within the realm of possibility.

The path to a default is clear.

America has until roughly June 1 to raise its debt limit

– a politically determined ceiling on total gross federal borrowing, currently at US$31.4 trillion (S$42.3 trillion) – or it will run out of cash to cover all its obligations, from paying military salaries to sending cheques to pensioners and making interest payments on bonds.