This past January the amount of debt the U.S. government can hold was reached and, according to Treasury Secretary Janet Yellen, its cash reserves will likely be exhausted by June 1st. Should that happen the government won't be able to pay its bills by taking on new debt causing the U.S. to default on its debt and that would result in negative effects across the financial system whether you are a welfare recipient, stock or bond investor, home owner or currently employed.

Make no mistake about it, a debt default by the government would adversely affect you one way or another. Here are 6 such ways:

1. Precipitate a Recession 

If the U.S. government is unable to pay interest payments on its debt it will get a credit downgrade and then investors will require higher interest payments to offset the risk of their debt holdings. That would impact the U.S. government’s interest payments and the cost of borrowing for businesses and households which would, in turn, slow economic growth and possibly (most likely) precipitate a recession. Historically, recessions have increased U.S. deficit spending as tax receipts fall and there is less income to help fund government activities.

In addition, a rise in interest rates would push down the value of outstanding bonds, which banks hold as capital reserves and this would make it even more challenging to cover deposits, which would further increase uncertainty in the banking industry.

2. Erode International Credibility

Any default would cause U.S. Treasuries to be undermined as an ultra-safe asset and this would result in a chain reaction of negative consequences throughout the global financial system - prices would plummet, demand could crater, and global investors might shift investment elsewhere.

3. Depress Stock Prices

According to Jonas Goltermann, a markets economist at Capital Economics, a debt default would hurt investor confidence in the U.S. economy and lower investor demand depressing stock prices by between 10% and 20%.

4. Impact the Income Of +100 Million Americans

Programs like Social Security, Medicare and Medicaid would be negatively impacted and affect the income of the more than 70 million disabled or retired Americans who rely on timely monthly Social Security checks, and the more than 40 million people who receive government food assistance.

5. Cause the Unemployment Rate To Jump

According to economists at Moody’s Analytics, the unemployment rate would jump up to 5%, and 1.5 million Americans would lose their jobs and spike to 8% and nearly 8 million people could lose their jobs should the crisis drag on for several weeks.

6. Hit the Housing Market Hard 

According to a recent report by Jeff Tucker, a Zillow senior economist, home sales would plummet, mortgage rates would climb to as high as 8.4%, and buyers' mortgage bills would soar by over 20%.

More By This Author:

The 5 Largest Canadian Cannabis LPs Are All Down YTD
Only 1 Major Cannabis MSO Is Up YTD
The Rise Of the American Debt Ceiling