Investors brace for a painful crash into America’s debt ceiling

time, the impossibility of America defaulting on its sovereign bonds is taken as a fundamental axiom of the financial system. The country issues the world’s reserve currency, so investors always stand ready to lend it money. And if you are able to borrow more, you can pay back your debts.Yet Washington is once again reminding the world that, through sheer mulishness, a default is indeed possible. Every now and again—as in 2011, 2013 and today—America smacks into its “debt ceiling”, a political device that places a hard limit (currently $31.4trn, or 117% of ) on gross government borrowing. Congress must then agree to raise or waive the ceiling in order to prevent the Treasury from failing to make bond payments or meet spending obligations. This time Janet Yellen, the treasury secretary, has warned that the government may run out of cash and accounting manoeuvres as soon as June 1st. And so on May 9th, congressional leaders gathered in the Oval Office with President Joe Biden for the very first stage of negotiation. They are a long way from a deal.