Sunday, October 13, 2013

U.S. Risks Default

U.S. Risks Joining 1933 Germany in Pantheon of Deadbeat Defaults

Reneging on its debt obligations would make the U.S. the first major Western government to default since Nazi Germany 80 years ago.

Germany unilaterally ceased payments on long-term borrowings on May 6, 1933, three months after Adolf Hitler was installed as Chancellor. The default helped cement Hitler’s power base following years of political instability as the Weimar Republic struggled with its crushing debts.
“The Fed is not going to taper while the government is shut down,” said Dean Maki, chief U.S. economist at Barclays Plc in New York. “One, there is a weight on the economy and, two, the Fed calls itself ‘data dependent’ and it’s hard to be data dependent when there’s no data coming out.” Photographer: Andrew Harrer/Bloomberg
“These are generally catastrophic economic events,” said Professor Eugene N. White, an economics historian at Rutgers University in New Brunswick, New Jersey. “There is no happy ending.”

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