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Your take: Are you worried about US default?

Posted By Claes Bell On 10/11/2013 @ 8:30 am In Government | 16 Comments

It’s now less than a week until the federal government is projected to run out of accounting tricks [3] and come up hard against the debt limit, the maximum amount the U.S. is allowed to borrow under existing law.

After that, what happens next is hard to predict. The government might be able to prioritize payments to Treasury investors for a while by stiffing other groups owed money, such as active military personnel and Medicare and Social Security recipients.

Even with some fancy footwork on the part of government bean counters, it’s likely that without a debt-limit raise, the government would eventually miss a scheduled payment to Treasury investors. At that point all hell would break loose, up to and including a financial panic even bigger than what we saw after Lehman Brothers collapsed. If that came to pass, that would probably mean a freeze-up in corporate and consumer credit, a massive hit to global stock prices and who knows what else.

While I still think the folks in Washington, D.C., will work something out before any of that takes place, I wrote a somewhat wonkish post [4] about the disastrous consequences a default would have for your 401(k) and investors generally. I have to admit, I’m pretty worried about it, but how about you? Do you think they’ll work it out in time? Are you losing sleep over a government default? Or is it just more of the noise from the Capitol that we’ve all grown accustomed to tuning out?

(Photo: Fox, h/t to TVtropes.org)


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[3] It’s now less than a week until the federal government is projected to run out of accounting tricks: http://www.bargaineering.com/articles/wp-content/uploads/2013/10/Simpsons-bomb.jpg

[4] wonkish post: http://em/umosevm/logon.aspxhttp:/www.bargaineering.com/articles/debt-ceiling-crisis-annihilate-401k.html

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