If the debt crisis roiling Washington were eventually to send the U.S. crashing into recession, America’s economy would hardly sink alone, the Associated Press reported. The repercussions of a first-ever default on the federal debt would quickly reverberate around the world. Orders for Chinese factories that sell electronics to the U.S. could dry up. Swiss investors who own U.S. Treasurys would suffer losses. Sri Lankan companies could no longer deploy dollars as an alternative to their own dodgy currency. “No corner of the global economy will be spared” if the U.S. government defaulted and the crisis weren’t resolved quickly, said Mark Zandi, chief economist at Moody’s Analytics. Zandi and two colleagues at Moody’s have concluded that even if the debt limit were breached for no more than a week, the U.S. economy would weaken so much, so fast, as to wipe out roughly 1.5 million jobs. Feeding the anxiety is the fact that so much financial activity hinges on confidence that America will always pay its financial obligations. Its debt, long viewed as an ultra-safe asset, is a foundation of global commerce, built on decades of trust in the United States. A default could shatter the $24 trillion market for Treasury debt, cause financial markets to freeze up and ignite an international crisis. Read more.
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