After a few days to think about it, I see no reason to change the opinion I formed after I first created this blog: In the long run, a US debt default would be no big deal, and not just because it would quickly be fixed up. (I am not talking about a scenario like a political decision by the US to default indefinitely, because that is an idle fantasy. Isolationist or anti-globalist American nationalists may sometimes advocate such scenarios, but they have no access to power.) The real issues are longer-term matters like the global status of the US dollar, the US balance of trade, and so on.
I'm not saying a default will never happen. In fact, a default brought about by a political game of "chicken" would be entirely consistent with the American tendency to produce embarrassing, headline-dominating spectacles which fill the world media for a few weeks or months and then vanish, mostly to be forgotten. And as Geithner said in his letter, such a default would have consequences: it would make borrowing more onerous (more expensive) for the US government. (For those who want the US government to stop borrowing so much, this is not an argument against risking default.) But a US Debt Default would not equal End Of The Economic World or even End Of American Hegemony. It would be just another spectacle, just another signpost, just another milestone on a long eventful journey dominated more by the subliminal trends which escape notice but build up over time, than it is by the passing scenery you can see at any single moment.
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