Treasury Says Mere Prospect of Default Endangers Economy
Source: NYT
By ANNIE LOWREY
WASHINGTON — The debt-limit impasse could cause credit markets to freeze, the dollar to plummet and interest rates to rise precipitously, the Treasury Department said in a report released Thursday. A default might prove catastrophic, the report said, and could potentially result “in a financial crisis and recession that could echo the events of 2008 or worse.”
“As we saw two years ago, prolonged uncertainty over whether our nation will pay its bills in full and on time hurts our economy,” said Treasury Secretary Jacob J. Lew in a statement urging lawmakers to act. “Postponing a debt ceiling increase to the very last minute is exactly what our economy does not need – a self-inflicted wound harming families and businesses.”
The report shows that the Congressional debt-limit standoff in 2011 hurt consumer confidence, small business confidence, household wealth and the stock market, with ramifications for lending and the economic recovery.
“A precise estimate of the effects is impossible,” the report says, “and the current situation is different than that of late 2011, yet economic theory and empirical evidence is clear about the direction of the effect: a large, adverse, and persistent financial shock like the one that began in late 2011 would result in a slower economy with less hiring and a higher unemployment rate than would otherwise be the case.”
Read more: http://www.nytimes.com/2013/10/04/us/politics/debt-limit-impasse.html?_r=0
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Wow who would have ever thought?
