The Default’s Impact

The US Treasury Department is warning that on Oct. 17th the government will run out of money and be unable to pay its bills unless the debt ceiling is raised.  The news is full of extremely dire warnings about the consequences of a default.  One story is found here.

As a macro-economist I am both concerned and amused by the dire warnings of global collapse.  Numerous countries around the world have defaulted in the last 100 years.  Many Latin American countries have defaulted multiple times.  For some the default caused severe economic pain but for others the pain seemed to have been inflicted primarily on large outside investors and had little impact on the lives of ordinary citizens.

I remember the panic and concern that occurred over Y2K.  People were very worried that dates changing from 1999 to 2000 would cause wholesale computer failures.  I was concerned and stockpiled large amounts of water, food and cash.  I did this because of what happened at a computer company I worked with during 1998, two years before Y2k.

The head of engineering was a very smart guy.  He said, let’s just test out what will happen when Y2k rolls around.  One Thursday just before lunch he arraigned for every computer in the company to have its date reset to 30 minutes before Y2K.  Then everyone in the company went out for a big lunch celebration at a local Chinese restaurant.  We went back to work after lunch, every computer had crashed and a few had crashed so severely that it took hours to get them rebooted.

This showed me that Y2K was a real and severe threat.  It lead me to stockpile.  This exercise, however, was repeated not only in our company but in companies across the globe.  The result was that Y2K was a non-event and I ended up eating for a long time a supply of relatively tasteless canned food.

There are no good macro-economic models for what happens when the US Treasury defaults on its debts but my experience with Y2K suggests the only way the default will cause the massive problems that the news is currently hyping is if banks, investors and the Treasury all do absolutely nothing.  Given both people and institutions are pro-active when faced with an impending problem my feeling is that a default on Oct. 17th will cause some issues but not the end of capitalism as we  know it.

I hope we will never know if my guess is right or wrong.

4 thoughts on “The Default’s Impact

  1. استفاده از لیزر برای از بین بردن موهای زائد یکی از مطمئن‌ترین و موثرترین روش‌هاست. بهترین لیزر موهای زائد اصفهان البته نتایج استفاده از این فناوری زمانی موثر و مشهود است که توسط بهترین دستگاه های لیزر موهای زائد انجام شود.

  2. Thank you for sharing this. What do I do if the Home Depot coupon isn’t working? Search for least purchase requirements that may should be met when using the coupon. Check the termination date of the home depot discount. See whether any necessity rules that must be met to use the coupon. Twofold verify whether the coupon code reordered accurately.

    What do I do if the Lowe’s coupon isn’t working? Check the termination date listed on your Lowe’s coupon code. Confirm that you reordered the whole Lowe’s promo code you need to use. Inspect the requirements of the lowes coupon generator and ensure your request meets them. Ensure that you are using a genuine Lowe’s promo code.

Leave a Reply

Your email address will not be published. Required fields are marked *