Episode 415 - On this week's show we discuss the US debt ceiling stand-off and its implications for investment markets. We look at protecting no-claims discounts on car insurance and whether it's worth the cost. Finally, we explore parking apps, surprise fees & tips on avoiding unnecessary charges.
Join the MTTM Community group, a friendly community that allows like-minded listeners to ask questions and chat.
You can also listen to other episodes and subscribe to the show by searching 'Money to the Masses' on Spotify or by using the following links:
Abridged transcript of Episode 415
In this section of the podcast we discuss the US debt ceiling, why it is important and the potential impact on investment markets if Congress doesn’t agree to raise it before 1st June 2023.
US Debt Ceiling
- The US debt ceiling is a limit on the amount of debt the US government can borrow, which is currently set at $31.4 trillion.
- It was originally introduced during World War I to provide flexibility for borrowing money.
- The debt ceiling also gives Congress oversight on the level of government borrowing.
- Periodically Congress needs to approve raising the debt ceiling to allow the government to borrow more money to keep functioning.
- Governments borrow money for various reasons, including spending and paying off existing debts, this isn’t unusual. But the concept of a debt ceiling is particular to the US.
- The crisis talks around raising the debt ceiling have become more political in recent years, with debates and posturing between parties. The Republicans are currently using the debt ceiling as a bargaining chip to pressure the Democrats into agreeing to spending cuts and changes to previously approved spending plans.
- If the debt ceiling is not raised, the US government could run out of money and default on its debt as soon as 1st June 2023.
- There is uncertainty about the exact consequences of a default, but it could have a significant impact on the US economy, with some estimates suggesting US GDP would fall by 4% if the situation goes unresolved for a month after a default.
- In 2013, during a similar debt ceiling crisis, analysis by the US Federal Reserve suggested that investment markets could fall by 20-30% and the US dollar could fall by 10% if the US defaulted on its debts.
- While an agreement to raise the debt ceiling is expected, short-term treasuries have shown signs of stress, with yields fluctuating. In the event of a default, long-term treasuries may experience lower levels of volatility in comparison.
- Gold and cash are considered haven assets that could potentially perform well, versus stocks and bonds, in the event of a default and extended political stand-off.
Is protecting your car insurance no-claims discount worth it?
In this section of the podcast we discuss the research from our recent article “What is no-claims discount and is it worth protecting?” which is linked to in the Resources section below.
Parking app tips
In this section of the podcast we discuss the additional parking fees that parking apps charge which are avoidable. The AA previously published research that showed approximately 200,000 people a day who pay for parking using an app are paying an average extra fee of 25p. This amounts to an additional £50,000 per day or £18 million per year in total charges.
- Some parking apps add additional charges to the cost of parking, which include convenience fees, text message alert charges, and a transaction fee.
- From personal experience this can increase the overall cost of parking by 20% versus paying with cash.
- Some parking apps charge additional fees for parking on the same day instead of pre-booking.
- So when parking make sure you check the advertised parking app's terms and conditions and consider paying with cash or card to avoid additional fees.
- Also turn off any in-app settings for unnecessary alerts and reminder text messages.