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If you’re like most Americans, the term “debt ceiling” probably didn’t mean that much to you until recently. Now, of course, the debt ceiling debate is front-page news, day after day. As a citizen, you’re no doubt hoping the situation is resolved in the best interests of the country. But as an investor, you may be especially concerned about what might happen to your holdings, and your overall investment strategy, if the debt ceiling is not increased by the Aug. 2 deadline.
Before you consider how the situation may affect you, let’s quickly review just what is meant by the term “debt ceiling” and what might happen if no agreement is reached. Essentially, the debt ceiling is the legal limit on borrowing by the federal government. If Congress doesn’t increase the limit, borrowed funds wouldn’t be available to pay bills, so the U.S. could be forced to default on its debt obligations, which would be unprecedented.
No one can really predict what might happen if the debt ceiling isn’t raised, but virtually everyone agrees that it would be an undesirable outcome. That’s why Congress has, more or less routinely, always raised the debt ceiling in the past — in fact, it’s been raised every year for the past 10 years. This year, however, political and philosophical differences between Congressional leaders and the current Administration have, thus far, blocked the lifting of the debt ceiling.
Nonetheless, there’s still time for Congress to take action before Aug. 2, which is the estimated date of when temporary actions to avoid default are exhausted. (The actual debt ceiling was reached in mid-May). And as an individual investor, here’s what you can do:
The debt ceiling story can certainly be unsettling — but it doesn’t mean you should let the roof fall in on your investment strategy.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.
Stephen Gerrald has been a licensed Financial Advisor since May of 2007. Originally from Nacogdoches, Tx, he is happily married to Mandy Gerrald from Savoy and lives in Faught. He is an Accredited Asset Management Specialist (AAMS) and graduate of Stephen F. Austin State University with an emphasis in Finance. Stephen is active in his faith in Christ, a member of the Greater Paris Rotary Club, active in the Lamar County Chamber of Commerce Ambassadors club, a big brother with Big Brothers/Big Sisters, and serves on several non-profit boards in the area including Lamar County Chamber of Commerce, Lamar County Human Resource Council, Lamar County Leadership Board, Big Brothers/Big Sisters, Greater Paris Rotary Club, and Footprints of Charity. He is a graduate of the Lamar County Leadership Class of 2008-2009