No corner of the global economy will be spared.

As President Joe Biden met with congressional leaders again today to

resolve the nation’s impending debt limit crisis, many Americans are confused as to what this particular situation, if left unresolved, will do to our economy. Understanding how the U.S. Treasury pays its obligations, as well as how investors far and wide will be impacted, thus creating a potential global chain reaction of economic downturns, is kind of complicated.

The United States has been here before, effectively shutting down the government until both political parties in both houses can find common ground to keep the nation’s economy going. However, should an actual default occur, it means the United States may not meet all of its obligations.

The video below explains how the debt limit works, as well as what happens if negotiations cannot reach a positive conclusion in time.

Here is an excellent resource on what could happen should the U.S. default on its debts.