While in Washington Debt ceiling talks are ongoing and the date is approaching when the government may be forced to suspension of payments, everyone warns that this will have dire consequences. But perhaps the suspension of payments is not needed to affect American economybecause the possibility of this is already detrimental.

Even if a deal is reached, prolonged uncertainty could drive up borrowing costs and further destabilize already wobbly markets. In this case, it will lead to a “freeze” in investment and hiring by businesses, as the US economy faces an increased risk of recession. Thus, it could wipe out funding for government projects, and the overall impasse could undermine confidence in the long-term stability of the US financial system, with what that means in the long run.

At the moment, there are few signs of panic among investors. Markets fell on Friday as the leaders Republicans Congress said it was suspending negotiations. However, the decline was limited, which means that the market does not take into account that an agreement will eventually be reached again.

Uncertainty could drive up borrowing costs and destabilize markets.

What is already happening is that investors are expressing fears that the government will default on short-term US Treasuries and are already demanding higher yields to take on that risk. As Robert Almeida, chief investment officer at MFS Investment Management, notes, “Now the impact of the support measures is waning and we are already seeing all these little hot spots.”

He notes that investors can get worried and suddenly change their minds, but when the market moves like a crowd, it moves quickly and violently. This happened when, in 2011, negotiations on a borrowing limit stalled. Analysis after a partial halt in payments showed that the fall in the market washed away 2.4 trillion. dollars from the wealth of American households, which took time to recover.

Today, credit is becoming more expensive, the banking sector is already shattered, and economic growth is ending rather than beginning. In 2011, the situation was completely different, because then the recovery from the global financial crisis was beginning, and now, with a particularly fragile banking system, the risk is much higher. Concentrated pressure can create problems in many ways.

Increase interest rates it will be translated into interest rates on auto loans, mortgages and credit cards. Consumers who have a lot of debt and who are late in paying it off are suffering as inflation has increased the cost of living. All this can lead to the fact that consumers “freeze” their purchases, which make up 70% of the economy.

An accompanying analysis showed that in 2011 the borrowing limit impasse resulted in a $1.3 billion increase in US government borrowing costs in fiscal year 2011. But then the debt was 95% of GDP, and now it has reached 120%, which means that servicing the debt will become much more expensive.