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Good Morning.

Lately, you may have come across a lot of discussions surrounding the "debt ceiling," leaving you curious about its significance and the reasons behind the ongoing concern. 

The debt ceiling refers to a limit on the total amount of debt the federal government can accumulate. 

It is important because it enables the government to borrow money to fulfill its legal obligations, such as paying Social Security benefits, government salaries, or covering interest on the national debt.

The concern surrounding the debt ceiling arises from the potential consequences of not raising it. Failure to increase the debt ceiling would impede the Treasury Department's ability to make timely payments, potentially leading to a default situation, which would be bad for the entire world economic system since the US dollar is the reserve currency and our system is built on faith that obligations will be met or paid.

The government reached its borrowing limit in January of this year and has been adopting measures to avoid a default. However, these temporary measures are expected to reach their limit, known as the "x-date," likely around June. 

The best analogy I've heard is akin to buying something with a credit card and then you decide you've spent too much and you're not going to pay the bill. Unfortunately, it's a manufactured problem since the debt ceiling has been raised over 100 times in the past 80 years.

Although I believe it will eventually be resolved, it could cause some pain in the meantime, but again, the trouble is how do you know how much pain? And when it is resolved, how fast will markets respond positively?  Who knows...

So, we will avoid making fear-based decisions, as they often lead to suboptimal outcomes. Instead, let us embrace a mindset that values thoughtful analysis and sticking to the plan. 
Thanks and have a great weekend.

Tim

P.S. If you feel worried or anxious about this, hit reply, and let's chat. 
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Eagle Ridge Wealth Advisors · 603 S. Main St. · Morton, IL 61550 · USA

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