As the U.S. government shutdown continues with little progress being made towards reaching any sort of consensus between Democrats and Republicans, the U.S. is coming closer and closer to defaulting on its loans. And, according to the Huffington Post, experts are saying that even the threat of a default may cause panic in the market place.
The government shutdown, which started over the House’s inability to come to an agreement on the Affordable Care Act, has since changed trajectory and is now a fight over how the government will pay down its debt, and under what terms will the debt ceiling be raised.
The market is already seeing effects with the price of insuring a one-year treasury bond rising to a staggering .38 percent of the bond.
Many government officials have stated that the U.S. can avoid default for longer than the originally projected Oct. 17th date by “prioritizing” its bills, as in forgoing social security payments to pay interest on bonds. However, experts warn that this would do little to help the economy, saying that at best, U.S. interest rates will rise, causing layoffs and higher prices for American consumers. Some warn that missing the deadline could be as– if not more– disastrous than the bankruptcy of Lehman Brothers, which triggered widespread panic in the global market, bank failures, and a deep recession.