Newswise — Steven C. Kyle, associate professor of Applied Economics and Management at Cornell University, comments about the implications of a U.S. government default if Congress and the White House fail to raise the debt ceiling by Aug. 2.
He says:
“The implications of a U.S. government default are far bigger and far more uncertain than most accounts would have you believe. We would be kicking an economy that is already in a fragile state.
“Worse than that, and certainly much more uncertain, is the effect of setting adrift what has been the anchor of the world economy for many decades. The U.S. dollar and U.S. Treasury obligations have long been the rock-solid basis for measuring the value and risk associated with every other currency and financial asset in the world. We would be putting an end to that, and the consequences are largely unknown since no country on Earth ever has, or ever would, voluntarily depose itself from that favored position.
“We would be irresponsible and, yes, crazy, if we allow the default of the U.S. government. A worldwide financial meltdown is just one of the scenarios that become possible to imagine.”
For more of Kyle’s views on the debt ceiling debate, see www.cnn.com/2011/OPINION/07/29/kyle.default.consequences
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