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Worst case the payments pause for a period, and resume shortly after. But the government will prioritize debt payment over operational expenses, because the con
by adam_arthur 3y ago
Worst case the payments pause for a period, and resume shortly after. But the government will prioritize debt payment over operational expenses, because the consequences of not paying the debt are much higher than furloughing employees. e.g. financial crisis and market crash
Not really a meaningful impact from a long term return perspective. It is possible that treasuries sell off in the short run... though so will everything else
- SnorkelTan 3y agoIt's more complicated than that. I'm not a finance insider, but I'd imagine the real damage from this lies in the derivatives market. Finance is to tightly interconnected these days. Something as bedrock the U.S. defaulting on its debt would probably cause a serious depression that exceeds the great depression.
- adam_arthur 3y agoAs I said, “financial crisis and market crash”. Treasury holders will get paid in the end regardless. But the government can continue to service debt by stopping all operational expenses, e.g. furloughing employees. So hitting the debt ceiling does not mean an immediate default