U.S. National Debt – Default Risks and Possible Consequences for the Global Economy

There is a widespread myth that a U.S. debt default could be catastrophic for the national and global economy. The article is devoted to the study of the probability and possible consequences for the world economy in a scenario where a full or partial default on U.S. government debt happens. The dynamics and structure of the U.S. debt are given. It plays a critical role in the global financial system. The USA has never defaulted on its public debt in contemporary history. The cases of Treasury payment delays in 1979, as well as the debt-ceiling crises in 2023 and 2025 are analyzed. The legal basis for the U.S. Treasury securities market is studied. The shortcomings of the legal regulation are revealed. Among them are as follows – no default clause in legal documents setting out terms for Treasury bonds; the absence of collateral for U.S. Treasury securities; no legal mechanism in place to compensate investors for the consequences of payment delays. From these studies, the following conclusions have been made: 1) the U.S. Treasury market is the world’s largest financial pyramid based on fait; 2) the only collateral for Treasury bonds is the word given by the U.S. government; 3) a default on government debt will not significantly affect the production of goods and services as debt is a purely financial category. There is a contrast between a current status of U.S. Treasury market and information surrounding it. Apocalyptic sentiments and predictions of world economy collapsing seem to be inconsistent. The main conclusion is that a default would lead only to a crisis in a global financial system, and not in production of goods and services. It would also cause the loss of confidence in the U.S. government in all the political and economic aspects, creating a threat to the country’s economic security.