Trouble expected


in Daily updates

I know it is always perilous to make predictions, including about economics and government, but the politics of the moment have me very worried about what the next year will bring. In particular, with Republic control of the US House of Representatives I think there is substantial risk of a debt ceiling crisis which causes severe economic consequences or, even worse, a partial sovereign default which causes even more severe consequences.

My main area of focus has become finding a job: not a perfect job, not an inspiring job, not a job that will put my skills to the best possible use, but a job that will keep me going and reverse the accumulation of debt.

{ 5 comments… read them below or add one }

. January 22, 2023 at 1:18 am

That adds up to an awful lot of unpaid and unhappy people — but that’s not the only reason defaulting on the debt has historically been regarded as unthinkable. If the U.S. were to default, all those unpaid creditors would be under pressure from their own creditors, setting off reverberations in credit markets worldwide.

. January 23, 2023 at 9:01 am

This is forcing financiers, lawyers and officials to focus on the unthinkable. The starting point of such contingency planning is that a sovereign default would be cataclysmic: in all likelihood stocks would plunge, borrowing costs would soar, growth would suffer and the dollar’s status as the world’s dominant currency would be shaken. Any way to avoid this series of disasters merits attention. The problem, unfortunately, is that each proposed workaround has severe—and quite possibly unworkable—drawbacks.

. January 29, 2023 at 12:03 pm

The U.S. has never intentionally defaulted on its debt, a track record that has made its Treasury securities a safe haven for investors globally and allowed the government to borrow money at low interest rates.

There is universal consensus that a debt ceiling breach would be a historic catastrophe. Interest rates would skyrocket and the stock market would tank. The economy would spiral into a recession, shaking consumer confidence and decimating the nation’s financial credibility on the world stage. The impact could ripple across the globe, prompting debt crunches in lower-income countries with foreign currency reserves held in a suddenly weaker U.S. dollar.

. February 2, 2023 at 4:05 am

More importantly still, the US Treasuries component of most people’s investment portfolios is the safest component of those portfolios. … If the federal debt were called into question in some way, or if confidence in the credit worthiness of the United States were somehow to be lost or to be substantially diminished, then pretty much every American would be immediately rendered much less valuable, so to speak. The net worth of every American would instantly plummet.

Milan February 22, 2023 at 9:40 am

US default on debt likely in summer or early fall if Congress doesn’t act, new analysis projects

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