What would happen if Congress doesn't raise the debt ceiling and the U.S. defaults on its debt later this month? The broad economic implications are unpredictable, but a default could cause huge trouble for the global economy.
But whatever happens to the global economy, one thing is clear: People all over the world who have loaned the U.S. government money won't get paid on time.
And lots and lots of people have loaned the government money. Those people are commonly referred to as owners of Treasury bonds. When you buy a bond, you are lending the government money, on the assumption that you will get your money back, plus interest, on time.
Here are three key groups of bondholders:
1. Pension plans and retirement accounts
If you have a pension plan or a retirement account, there's a very good chance you are lending money to the U.S. government.
And some big funds are taking precautions right now. PIMCO, which manages a lot of retirement money, doesn't own any Treasuries that are supposed to pay out money between Oct. 17 (the Treasury's deadline for raising the debt ceiling) and the beginning of December. "We've been avoiding them," Tony Crescenzi, a strategist and portfolio manager at PIMCO, told me.
A lot of PIMCO's clients can't risk getting paid late. Some need the money to pay employees. Others need to send out pension checks. "There is de minimis risk of not getting paid on time, but it exists," he said. "Why take the chance?"
The Chinese government holds about $1.2 trillion in Treasury bonds. Unlike some other bondholders, China could live with a short delay in getting paid.
But a short delay could have long-term consequences if it leads China and other bondholders to see U.S. Treasury bonds as a more risky investment. It could lead them to start shifting money out of U.S. bonds, which could drive up the interest rate the U.S. pays on its debt.
3. Social Security
Weirdly, if the U.S. does have to pay higher interest on its debt, it could help another big bondholder: the Social Security administration. The entire Social Security trust fund — over $2 trillion — is invested in Treasury bonds. This is required by law. If the new Treasury bonds Social Security buys pay interest at a higher rate, that would mean more income for Social Security.
Still, that doesn't mean it would be a good idea for the government to default.
"I'm crossing my fingers that it doesn't happen," Michael Astrue, who used to run Social Security, told me. "It would create a lot of wreckage in the country as a whole."