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Potential US Default

Danneskjold
Oct 14 2013 at 11:04
8 posts
Floating an idea here; it seems the markets pretty much expect that the US will not default on it's debt, and that politicians are going to run down to the wire before making any kind of concession/reaching agreement. This would be like the end of last year, for example, with the 'Fiscal Cliff'. So there isn't much real worry in the markets about the debt ceiling.

But, what's going to happen when the political discussion does come down to the wire? Imagine that it's Thursday, the markets are closing and there is no deal. US treasuries are already up 60 points, so clearly there are some jitters getting into the market already. I mean, a lot of investors will have some confidence that a deal will be made overnight -but there is always the 'what if' morning comes around and nothing happens.

Also, maybe politicians go over the wire a little bit, and don't reach an agreement until late Friday, and by then the markets are already closed for the weekend.

So, in this hypothetical situation... how much market uncertainty are we going to be looking at late on Thursday if nothing happens in Washington? What if the US goes technically past the default line (like it did in 1979) and it looks like the issue won't be resolved before the weekend? Basically, at what point do investors start to think that an agreement might not be reached?

stevewalker
stevewalker
Oct 14 2013 at 11:08
1439 posts
suspend trading instead of thinking endless # s of possibilities. after one out of endless happened then you can resume

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