U.S. Treasury: default would be like 'late 2008 or worse' - Macleans.ca

U.S. Treasury: default would be like ‘late 2008 or worse’


The U.S. Treasury released a short analysis today laying out dire predictions about what would happen if the debt ceiling is not raised the the government goes into default. They looked at the economic impacts of the 2011 threat of default and found that the mere possibility resulted in real economic impacts.

The Potential Macroeconomic Impact of Debt Ceiling Brinkmanship

The bottom line:

In the event that a debt limit impasse were to lead to a default, it could have a catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth—with many private-sector analysts believing that it would lead to events of the magnitude of late 2008 or worse, and the result then was a recession more severe than any seen since the Great Depression.

Obama says he won’t negotiate with Republicans over the debt ceiling — because that would set a precedent encouraging brinksmanship every time the debt ceiling will need to be raised in the future. Yet it’s hard to imagine he’ll let the country go into default. The deadline is Oct. 17.

Filed under: