If the US government chooses to default on paying its debts, it would have a significant impact on the global financial system. The US government is the largest borrower in the world, and its bonds are considered to be the safest investment in the world, which is why they are used as a benchmark for many other financial instruments.
If the US government defaults on its debt obligations, it would likely cause a global financial crisis, as investors and financial institutions would lose faith in the US government's ability to repay its debts. This could lead to a severe economic downturn, as investors would pull their money out of US Treasury bonds and other US assets, leading to a sharp decline in the value of the US dollar.
The creditors of the US government are both domestic and international. Some of the largest creditors are China and Japan, which hold over $1 trillion each in US Treasury securities. Other countries, such as Saudi Arabia, Brazil, and Switzerland, also hold significant amounts of US government debt.
Many American citizens own bonds issued by the US government through their retirement accounts, mutual funds, or directly through individual investments. It is estimated that about two-thirds of the US national debt is held by US citizens and institutions. If the US government defaults on its debt obligations, these investors would likely suffer losses, as the value of their bonds would decline.
However, it is important to note that the US government has never defaulted on its debt obligations, and it is unlikely that it would choose to do so. Defaulting on its debts would have severe consequences for the global financial system and would damage the US government's creditworthiness and reputation. The US government has always paid its debts on time, and it is expected to continue doing so in the future.