Felix Salmon: The harm done to the global financial system by a Treasury debt default would not be caused by cash losses to bond investors...Rather, the harm done would be a function of the way in which the Treasury market is the risk-free vaseline which greases the entire financial system…. The US government, in one form or another, is a counterparty to every single financial player in the world...[W]e’re already well past the point at which that certainty has been called into question...
The global faith in US institutions has already been undermined. The mechanism by which catastrophe would arise has already been set into motion. And as a result, economic growth in both the US and the rest of the world will be lower than it should be. Unemployment will be higher. Social unrest will be more destructive…
Every day that goes past is a day where trust and faith in the US government is evaporating--and once it has evaporated, it will never return. The Republicans in the House have already managed to inflict significant, lasting damage to the US and the global economy--even if they were to pass a completely clean bill tomorrow morning, which they won’t. (Vitus emphasis)
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