The US government could start running out of money within weeks unless it allows itself to borrow more. Coming against that backdrop, US Treasury Secretary Janet Yellen has warned that failure to raise the US' debt ceiling could have dire consequences.

Ahead of US President Joe Biden's meeting with congress leaders on the issue, Peter C Earle, Economist and Research Faculty at the American Institute for Economic Research takes a deep dive into technicalities behind the debt crisis.

This podcast is produced and edited by Yeo Kai Ting (ykaiting@sph.com.sg) 

Highlights:

01:05 - US debt has sometimes risen faster than the debt ceiling, so why the urgency to take action right now?

01:52 - The clock is ticking as we speak. What drastic consequences could we see if the debt ceiling isn’t lifted on time before the US breaches that ceiling? Is a recession on the horizon in your opinion?  

03:02 - The US has actually modified the debt ceiling 78 times since 1960. Could you give us some sense of why it has grown so much? 

03:51 - Since we're talking about history, I'm going to take you back to the very very beginning. How did this concept of the ceiling come about?

04:27 - Can hitting the debt ceiling now be avoided without Congressional action?

05:21 - Some economists are saying that the Treasury Department could potentially buy more time, like you said, by engaging in other unprecedented actions - such as selling large amounts of gold, minting a special large-denomination coin, issuing IOUs that could be sold and traded in private markets, or invoking the Fourteenth Amendment to override the statutory debt limit. Do you believe such options could help the situation, and if so, how much more time can that buy? 

06:46 - We’re just a day ahead of President Biden’s meeting with congress leaders. How likely will we see a raise in the debt ceiling at this meeting? And if not, which other markets are likely to see ripple effects?

07:30 - Warren Buffett - whose conglomerate is viewed as a barometer of economic health in the US because of the range of businesses it owns - believes that we will skirt a recession. Which sectors are expected to be the hardest hit in the coming months?

08:34 - So we were talking about buying time earlier, what kind of negative consequences would that bring if they were to buy more time?