Sobering story in Bloomberg on Sunday on just how bad things could be should the U.S. default on its debt obligations this month:
Failure by the world’s largest borrower to pay its debt — unprecedented in modern history — will devastate stock markets from Brazil to Zurich, halt a $5 trillion lending mechanism for investors who rely on Treasuries, blow up borrowing costs for billions of people and companies, ravage the dollar and throw the U.S. and world economies into a recession that probably would become a depression. Among the dozens of money managers, economists, bankers, traders and former government officials interviewed for this story, few view a U.S. default as anything but a financial apocalypse.
The $12 trillion of outstanding government debt is 23 times the $517 billion Lehman owed when it filed for bankruptcy on Sept. 15, 2008. As politicians butt heads over raising the debt ceiling, executives from Berkshire Hathaway Inc.’s Warren Buffett to Goldman Sachs Group Inc.’s Lloyd C. Blankfein have warned that going over the edge would be catastrophic.
Also in this story: some talk about how we might mitigate some of the damage should we go into default, including that it might be a “technical default.” As in, we’ve got the money, we just don’t want to pay. But that does little to allay concerns that the U.S. is no longer a safe haven for investments.
So yeah. Totally no bigs. Holding the debt ceiling hostage? A perfectly acceptable way to govern.