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Amitava Chattopadhyay


Amitava Chattopadhyay
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A not so obvious but significant consequence of the US government failing to reach an agreement on debt ceiling!

The US government could not come to an agreement leading to a shutdown in many non-essential services, including the processing of passports and visas! Indeed, if by October 17th there is no agreement, things get worse and the US government could default on debt payment.

This has huge potential consequences that may not be obvious at first glance. One key advantage that the US currently enjoys is that the US$ is the reserve currency of choice. This confers benefits to the tune of US$100 billion to the US government and its citizens in terms of lowered borrowing costs.

This may not disappear with a debt default as currently there is no other currency available to fill the reserve currency shoes. However, it is likely to lead to a speedier erosion of the might of the US$ as a reserve currency and thus a quicker increase in the cost of debt for the US government and its consumers.

  Oct 1, 2013 | Musings




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