Consider the debt ceiling in the US. \u00a0According to Goldman Sachs, without an increase in the ceiling, the Treasury would no longer be able to issue debt from October 17 and would deplete its cash by the end of the month. Much confusion exists about what would happen if the Treasury ran out of cash and could not increase its outstanding debt. The optimistic view is that it could meet its priorities, including debt service, by managing its payments. If so, no default need occur. Jack Balkin of Yale University argues just this. The pessimistic view is that managing its cash flows in such a way would be illegal and possibly impossible \u2013 not least because cash receipts fluctuate substantially. But the Treasury, playing a game of chicken, would argue the pessimistic case even if it believed it could cope.<\/p>\n
At best, a failure to raise the debt ceiling would necessitate a sharp cut in spending. At worst, the US would default. Analysts at Bank of America Merrill Lynch argue that hitting the ceiling would require the US to balance its budget at once, cutting spending by about 20 per cent, or 4 per cent of GDP. That would push the US into another recession \u2013 even if there were no default. The consequences of an actual default, particularly one that lasted for some time, are beyond prediction. Unlike a shutdown, there is no precedent, for good reason. The notion is suicidal.\u00a0To Debt or Not to Debt, That is the Question<\/a>\u00a0\u00a0<\/strong>from Martin Wolf in the Financial Times.<\/p>\n Consider the debt ceiling in the US. \u00a0According to Goldman Sachs, without an increase in the ceiling, the Treasury would no longer be able to issue debt from October 17 and would deplete its cash by the end of the … Continue reading ![\"Debt\"](\"http:\/\/www.w-t-w.org\/en\/wp-content\/uploads\/2013\/10\/Debt-300x195.jpg\")
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