Somewhere between June and July United States they run out of money. This will be his first big test. President Joe Biden from the moment of nomination of his candidacy for a second term in White House.

If Democrats and Republicans do not agree to raise the government borrowing limit, the country could face an unprecedented devastating default.

History shows that lawmakers will come to an agreement at the last minute, but even such a development could shake already fragile markets. After bank failures and increased volatility, the last thing the US President and the US financial system needs is a predictable crisis.

investors they worry about “black swans” or unexpected, rare, and catastrophic events, as writer Nassim Nicholas Taleb defines them. However, the debt ceiling debate is a “white swan” or completely predictable, all-too-frequent event that can wreak just as much damage as its darker sibling.

Congress has gone to great lengths to establish a debt ceiling that limits how much the Treasury can borrow to pay its bills—this has happened nearly 80 times since 1960. The latest limit is $31.4 trillion. According to USD Moody’s Analytics, the final date, the so-called “X-date”, may come at the end of July. However, weaker-than-expected tax revenue raises the possibility that the government could run out of cash in early June.

Passing that date without a deal in Congress would mean bankruptcy. The Ministry of Finance will not be able to issue bonds to finance the needs of the state. And this, in turn, will be forced to cut spending sharply to eliminate the $350 billion budget deficit.

In just one year, these cuts will shrink the economy by 4 percent and cut about 7 million jobs, raising unemployment from the current 3.5 percent to 8 percent, according to Moody’s.

The stock market is likely to lose a fifth of its value, losing $10 trillion. dollars from family wealth. In addition, the Fed will most likely not be able to accept US Treasuries as collateral, making it nearly impossible to provide liquidity. This is why, in all previous controversies over government borrowing, Congress has raised or suspended the debt ceiling.