The government shutdown has had major disruptions across the nation, but an even bigger threat comes as the national debt approaches the debt ceiling. But many people don't even know what the debt ceiling is, let alone why everyone is so worried about it.
In the following video, Dan Caplinger, the Motley Fool's Director of Investment Planning, runs through three key facts you need to know about the debt ceiling. Dan defines the law and what it means for government borrowing, describing the actions one financial company took to avoid the potential consequences of owning Treasury debt. He then notes that there's no established priority for determining who gets paid once we hit the debt ceiling. That could have a huge potential impact on United Technologies (NYSE: UTX), Boeing (NYSE: BA), and Lockheed Martin (NYSE: LMT), especially if a prolonged shutdown leads to permanent defense-contract cuts. Finally, Dan notes that even if the debt ceiling is raised in time, the U.S. could face another downgrade of Treasury debt. This time, shareholders in PIMCO Total Return (NYSEMKT: BOND) and Vanguard Total Bond (NYSEMKT: BND) might not be so lucky as bond investors were two years ago, when the first-ever debt downgrade led to lower interest rates.
Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of Lockheed Martin. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.