U.S Debt Ceiling Crisis

2ygb4cmqetsjhx

Hi everybody. Just something I want to know. I'm not an economist or anything but I am wondering would anybody know what the effects of not raising the debt ceiling would be on the US and world economy. How would this effect Ireland?

Also if the debt ceiling is raised is this just kicking the can down the road? Should we be worried about this in Ireland? Seems to me that the implications of a US default would eclipse the Lehmen brothers collapse.

andrew

Because it'd be such an extraordinary event, nobody knows what would happen, other than to know that it'd be bad. to say it'd be worse than Lehmans is an understatement! And nobody thinks it will happen either, and with good reason; just letting your country default would be an insanething to do; especially for america. That nobody thinks this would happen is illustrated by the fact that american bond yields remain very low, so there's no need to worry.

tara73

op, I ask myself the same question and it seems nobody has the answer to it. as andrew wrote it's too bad to imagine and obviously nobody knows what would happen in detail but think as well it can only be worse than lehmans collapse...
at the moment I think the republicans play games to damage obama the most as they can but at the end of the day (1.august:)) they'll magically agree to raise the debt ceiling somehow.

and nobody knows how long it'll last to be back to square 1 to raise the debt ceiling again or whatever else action needed to prevent the default.

rodento

Doesn't look good when the republicians get their math wrong:eek:

http://www.washingtonpost.com/opinions/the-gops-fuzzy-math/2011/07/20/gIQANu3hPI_story.html

sollar

What are the ratings agencies doing about this.... nothing by the looks of it. America still has its AAA rating??

Sticky_Fingers

sollar wrote: »

What are the ratings agencies doing about this.... nothing by the looks of it. America still has its AAA rating??

If they miss the deadline and go into selective default then they are going to have to cut it down, some down to D (junk) while others not so sharply.

http://www.reuters.com/article/2011/06/29/us-usa-debt-sandp-idUSTRE75S5GV20110629

From the article:

(Reuters) - The United States would immediately have its top-notch credit rating slashed to "selective default" if it misses a debt payment on August 4, Standard & Poor's managing director John Chambers told Reuters.
Chambers, who is also the chairman of S&P's sovereign ratings committee, told Reuters on Tuesday that U.S. Treasury bills maturing on August 4 would be rated 'D' if the government fails to honor them. Unaffected Treasuries would be downgraded as well, but not as sharply, he said.
"If the U.S. government misses a payment, it goes to D," Chambers said. "That would happen right after August 4, when the bills mature, because they don't have a grace period."

andrew

This short article mostly answers OP's question, as far as it can be answered.