A debt-ceiling deal may be close but the crisis likely isn't solved for good. Here's what would happen if the US actually defaulted on its debt.
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Phil Rosen
May 27, 2023, 17:24 IST
Josh Lipsky, senior director, Atlantic CouncilJosh Lipsky/Atlantic Council
Happy Saturday, team. I'm Phil Rosen — today I'm excited to share my conversation with an economic and policy expert from the Atlantic Council, who's a former IMF advisor and speechwriter to European bank chief Christine Lagarde.
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As reports emerge that the White House and Republican lawmakers are close to a deal, markets are breathing a sigh of relief. But the potential agreement will extend the borrowing limit for another two years, meaning the problem will almost certainly arise again.
Today we're looking at what a default might actually look like.
Per usual, if you have any suggestions for who I should interview next, let me know on Twitter @philrosenn, or email me prosen@insider.com.
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Josh Lipsky is the senior director of the Atlantic Council's GeoEconomics Center. This conversation has been lightly edited for length and clarity.
Phil Rosen: To start us off, how would global investors react if the US does default on its debt?
Josh Lipsky: In a crisis, investors want something safe, where they can get a reasonable return. Other sovereign debt markets don't have the capacity for huge inflows, nor is that debt all highly rated.
Therefore, in a default, if you believe it will be short lived it makes sense to still go into Treasurys.
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So the Treasury market remains intact in this scenario?
What about the rest of the economy? What could happen there?
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JL: The broader US economy will suffer, the stock market will suffer, there will be higher unemployment. People won't get critical benefits from the government. We could go into a recession.
So just because the Treasury market ends up doing fine does not mean good news for the US economy.
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