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Economics Discuss First a default, then a depression? Some think so at the Political Forums; First a default, then a depression? Some think so Damage from a U.S. credit default would be more than bad ... |
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![]() First a default, then a depression? Some think so
Damage from a U.S. credit default would be more than bad public relations—it could affect everyone from bankers to pensioners to holders of supposedly sacrosanct money market funds. In a research note analyzing the various consequences of a debt default, banking analyst Dick Bove pointed to a variety of areas: Quote:
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The focus has been primarily on the shutdown, which ultimately poses a discomfort and some modest damage to economic growth, but would have little lasting effect after government reopens. That narrative has begun to change, however, with warnings that previous shutdowns may not serve as accurate templates for the current standoff. Citigroup strategist Jeremy Hale outlined the dynamics in an analysis: In 1995, House Speaker Newt Gingrich received the US public's ire while President Clinton caught a wave of popular approval that helped him to re-election later in 1996. Markets may believe that this makes a deal more likely. But market complacency may ignore the risk that U.S. politics are far more polarized now than then, and that both sides may believe that they have something to gain from holding out Hale, too, worries that investors aren't taking into account a worst-case scenario: With the debt ceiling there is far more danger. Government shutdowns lead to small and temporary output losses as public workers are typically paid in arrears when government re-opens. But not raising the debt ceiling means a potentially damaging fiscal drag and, eventually, default risk. We assume that even partisan politicians know this and that the ceiling is indeed raised. However, some politicians are reportedly comparing the summer 2011 US sovereign ratings downgrade to an outright default as evidence that it may not matter. ![]() ![]() ![]() Jeelee Wheely, what a buncha poop heads
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“Quod scripsi, scripsi" ╠═════════════════════════════════════╣ “Serpent's breath, charm of death and life, thy omen of making!” Or if you're a traditionalist, “Anál nathrach, orth’ bháis’s bethad, do chél dénmha!” And children, say it like you mean it! ╠═════════════════════════════════════╣ ![]() |
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default, depression, first, some, then, think |
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