Treasury: Catastrophe awaits if debt ceiling not raised

Hard at work despite the government shutdown, Treasury authors a report warning of "catastrophic" consequences if Congress doesn't raise the debt ceiling and the U.S. is forced to temporarily default. The executive summary: 2008 will be considered a tea party by comparison.

Taking us back to August 2011, Treasury reminds of the harm caused by just the threat of default then. To review: The S&P 500 declined 13% in about a month. To review further: This was also in conjunction with the EU debt crisis bubbling over. To review even further: This washout set the stage for a 50% increase in the market in the ensuing two years.

Comments (14)
  • bbro
    , contributor
    Comments (11240) | Send Message
    Look for the volatility spike....
    3 Oct 2013, 10:54 AM Reply Like
  • chopchop0
    , contributor
    Comments (5336) | Send Message
    would love to stock up on more. 2009 and 2011 were nice add points for quality names.
    3 Oct 2013, 11:09 AM Reply Like
  • Lionel Yeo
    , contributor
    Comments (421) | Send Message
    can't wait to get this nonsense climax.


    It's about time someone in gov put a stop to Obama and his irresponsible spending ways. This is like snatching back you're kids' credit card and snapping it in two, "I ain't paying it no more."


    You're going to get a lot of kicking and screaming, perhaps a few doors slamming.
    3 Oct 2013, 12:01 PM Reply Like
  • The Sociology of Finance
    , contributor
    Comments (955) | Send Message
    Blowing up the government is not a good way to achieve reform. That is what elections and the legislative process is all about.
    3 Oct 2013, 12:11 PM Reply Like
  • Bouchart
    , contributor
    Comments (1174) | Send Message


    We haven't had any meaningful reform in Washington in ages. Catastrophe is the only way it is going to happen.
    3 Oct 2013, 11:13 PM Reply Like
  • Jmasa
    , contributor
    Comments (3) | Send Message
    We should not allow the Politicians to gerrymander their districts as the result creates Politicians that are too polarized to compromise enough to conduct the country's business.
    If they won't compromise enough to prevent the default of US debt they should all be thrown out of office!!!
    3 Oct 2013, 10:30 PM Reply Like
  • EK1949
    , contributor
    Comments (2936) | Send Message
    "If they won't compromise enough to prevent the default of US debt they should all be thrown out of office!!!"


    Don't get your hopes up. The next generation of debt phobics will be just as devoted to ruining the economy with bad ideas as this one. It's always "cut, cut, cut" when we need to "build, build, build". We'll never get a good economy by shrinking it, but I'll bet any amount of money that the politicians who replace the current batch will be absolutely convinced that deficits are too big and everything else must take a back seat to deficit reduction.


    How many years of sequestration misery do we have to look forward to, and how much gratuitous suffering will ensue for millions of unemployed and underemployed workers and their families? All of this is for the sake of a theory that if we shrink the economy now we will all be better off in the sweet bye and bye! But if you think this through it should be clear that if the golden age ever arrived it wouldn't be long before the same arguments would be used to ruin that economy to save precious dollars for a future that could only be a repeat of the same dreary pattern.
    3 Oct 2013, 11:51 PM Reply Like
  • Kyle Spencer
    , contributor
    Comments (1244) | Send Message
    Seconded on volatility spike.
    3 Oct 2013, 10:45 PM Reply Like
  • PalmDesertRat
    , contributor
    Comments (3859) | Send Message
    Let's hope we get a catastrophe here.


    the market needs to correct. I'm sitting on more cash than I've had in a long time and need to reinvest it.
    3 Oct 2013, 10:47 PM Reply Like
  • minecanary
    , contributor
    Comments (1411) | Send Message
    I'm hoping the 99% get active again...and come armed this time. It's time to right the ship.
    3 Oct 2013, 11:34 PM Reply Like
  • Lionel Yeo
    , contributor
    Comments (421) | Send Message


    This is the biggest nonsense ever. Firstly, it's a vote to extend the debt ceiling, not repay the debt. The whole idea of preventing a shut down is rubbish. It's already in default. Already. If it were up to bond holders, it would already been in default a long time ago.


    I say let's hit the Catastrophe reset button now rather than later before its too late.
    4 Oct 2013, 11:35 AM Reply Like
  • The Long Tail of Finance
    , contributor
    Comments (1802) | Send Message
    >>The executive summary: 2008 will be considered a tea party by comparison.


    Interesting choice of words, given that the tea party has led to the wussficaiton of the republicans, whose mission in life is to end the ACA and anything else they don't like by tacking it onto things that hold this country up from moving forward. Hoping in coming years more moderate people replace the likes of Boehner, Cantor, Rubio, and Cruz.
    4 Oct 2013, 12:07 PM Reply Like
  • UbuTranscendent
    , contributor
    Comments (73) | Send Message
    Regarding: "August 2011 ... The S&P 500 declined 13% in about a month. ... This washout set the stage for a 50% increase in the market in the ensuing two years."


    The Treasury is not known for hyperbole, so a sentence from their report is particularly noteworthy: "In the event of a default, the U.S. economy could be plunged into a recession worse than any seen since the Great Depression."


    Clearly, in the event of an actual default, the markets are not likely to follow the same happy trajectory they did in 2011-12.
    4 Oct 2013, 12:40 PM Reply Like
  • trollipop
    , contributor
    Comments (53) | Send Message
    Stop with the fear mongering. The US will not default on its debt and the smart money knows it. There's too much at stake on both sides of the aisle. As always, crisis will be averted in the last hour.
    4 Oct 2013, 03:52 PM Reply Like
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