Jon Healey is a senior editor on the Utility Journalism team, which tries to help readers solve problems, answer questions and make big decisions about life in and around Los Angeles.
He has been with the Los Angeles Times since , previously reporting on technology news and writing opinion pieces. Trump ally Stephen Bannon indicted on contempt charges over Capitol riot inquiry. Biden and Xi to hold virtual summit Monday to discuss tensions.
Democrats call for censure of GOP congressman over violent video of Rep. All Sections. About Us. B2B Publishing. Business Visionaries. Hot Property. Times Events. Times Store. Facebook Twitter Show more sharing options Share Close extra sharing options.
Treasury Department officials say the federal government can continue operating without borrowing more money but only for a matter of weeks.
By Jon Healey. Politics Threats against members of Congress are skyrocketing. Politics After a summer of criticism, political pressure on Kamala Harris eases — for now.
Jon Healey. Goldman Sachs says , households could be evicted this year unless Congress acts. That's what distinguishes the United States from almost every other country on the planet," Zandi of Moody's said. Because of America's long track record of paying its debt, it's very cheap for Washington to borrow. But a default would force ratings companies to downgrade US debt and shatter that borrowing advantage. Higher borrowing costs would make it much harder for Washington to borrow to pay for infrastructure, the climate crisis or to fight future recessions.
Market chaos. Soaring Treasury rates would set off a chain reaction in financial markets. That's because Treasuries, viewed as risk-free investments backed by the full faith and credit of the federal government, serve as the benchmark by which virtually all other securities are measured.
Everything from stocks and bonds to exotic securities take their cues from Treasuries. A spike in Treasury rates sparked by a default would cause booming stock markets to become unglued.
Not only would millions of Americans lose money in the stock market, but it would suddenly become more expensive for families and companies to borrow. That's because Treasuries serve as the benchmark for mortgages, car loans, credit cards and corporate debt. A spike in borrowing costs is a huge problem for an economy that relies on access to credit.
If the debt ceiling is not lifted, then the federal government will technically default on some of its obligations. It would be forced to prioritize payments, deciding who will get paid and who won't. Ultimately, someone will lose out, whether it's federal employees, veterans, Social Security recipients or defense contractors.
For all these reasons, investors are not freaking out about the debt ceiling. Wall Street expects Washington will eventually raise borrowing limit, like it always does. Failure to do so would simply be too dangerous. The precise timing of when the debt ceiling must be lifted is a bit unclear. What would a California default look like? If any company tried that, they would be in bankruptcy court in days. Another possible California scenario is that the State will try to sell or roll over some debt, and no one buys it.
We saw last September what happens when lenders refuse to lend to large creditors. If we continue on the current path, the worst case is also the more likely case. Bad news keeps dribbling out. One day we find we are paying percent-higher-than-anticipated interest on a bond issue.
A few days later, we find the budget shortfall is billions of dollars higher than projected just a short time ago. Every month brings new bad news. The risk that one of those news events triggers a crisis grows with every news event. Responsible action would be creating a gimmick-free budget that places California finances on a sustainable path, and provides an environment that allows for opportunity and job creation.
They need to work with Federal Government and Federal Reserve Bank officials to insure a coordinated plan to limit damage to financial markets. That plan needs to be ready to release when markets go crazy, which is exactly what could happen when participants realize that default is possible. It could be needed sooner than they think. Bill Watkins is a professor at California Lutheran University and runs the Center for Economic Research and Forecasting, which can be found at clucerf.
Powered by. Learn more about this title and Joel's other books. Leventhal Center for Advanced Urbanism's yearlong study of the future of suburban development.
Find out more.
0コメント