Wednesday, October 9, 2013

The United States will not default...

There is a lot of nervousness and anxiety out there, particularly in the capital markets over the US government shut down for one, but more so over the prospect that by failing to increase their debt ceiling the United States might default on some of its obligations.

Well, it ain't gonna happen.

For arguments sake, if the US were to default the consequences would be nothing short of disastrous, not just for Americans, but for the entire world.  US government debt instruments are close to the gold standard when it comes to investments sought for safety during times of uncertainty.  If Washington stops paying its bills, the Great Financial Crisis of 2008 will look like a day at Disney Land as capital markets freeze with no hope of help from the government of the world's largest economy.

That is why it won't happen.

Does that mean the fight going on between Tea Party factions and Democrats supported by moderate Republicans is without meaning?  Far from it.  Tea Party types are adamant about derailing health care reform.  In doing so they are providing a big boost to advocates of the status quo.  The fact is the US has the most expensive health care system in the world, and while millions of Americans have no coverage (including children) the health care industry is doing just fine at making profits.  

Why would an industry making billions of dollars want things to change?  They don't.  

But whether a deal is reached or not, there is no way US legislators will tank the world economy, although we may get down to the 11th hour as zealots seek to leverage fear in an effort to gain concessions. 

If Obama and the democrats blink, the big winner will be the U.S. health care industry, at least in terms of their profits.   

2 comments:

Richard said...

I completely disagree, and here is why: http://canadiantrends.blogspot.ca/2013/10/us-debt-never-say-never.html

Gordon Cawsey said...

Looks like my opinion was vindicated...but then it was pretty much a consensus opinion.