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By Jason Stipp and Jeremy Glaser | 01-17-2013 04:00 PM

What Does the 'Debt Ceiling' Mean for Investors?

Although we're unlikely to face a worst-case scenario on the debt ceiling debate, it's important for investors to understand the potential consequences.

Update: On Friday, House Republicans said they were planning on passing a debt-ceiling extension next week that would buy the Treasury Department another three months. This move isn't shocking, as we expected that the high costs of default would mean that the ceiling would be raised. But this doesn't mean that the uncertainty around the United States' fiscal issues is gone. We have two more near-term battles regarding the planned sequestration cuts and the budget resolution that need to be passed by the end of March to avoid a partial government shutdown. And if these are not resolved satisfactorily, we could very well be talking about the debt ceiling again in three months.

On the whole, this move underscores our thesis that we are unlikely to breach the debt ceiling but that debates over other fiscal issues will continue to add another layer of uncertainty to the market. --Jeremy Glaser

Jason Stipp: I'm Jason Stipp for Morningstar.

So you survived the fiscal cliff round one. There are two more words, though, that you're going to be sick of hearing in the next few weeks: "debt ceiling."

Here to talk about exactly what the debt ceiling is and what are the implications for the government and potentially for investors is Morningstar markets editor Jeremy Glaser.

Jeremy, thanks for joining me.

Jeremy Glaser: Jason, my pleasure.

Stipp: So, before we talk about some of the different possibilities here, first of all, what is the debt ceiling exactly? What does it mean and what would bursting through the debt ceiling mean?

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