DEFAULT COULD ERASE SIX MILLION U.S. JOBS, MOODY’S SAYS

If Congress does not raise the debt limit and the U.S. defaults on its debts, the country would vaporize six million jobs, bounce the unemployment rate to 9 percent, and the economy could hurtle into a tailspin that would rival the Great Depression, Moody’s Analytics declared in a 21 September report, “Playing a Dangerous Game With the Debt Limit.”
The government will run out of money next month if Congress fails to act. This Thursday has been set as the deadline to do so.
A decision to not pay its bills would cost the U.S. about six million jobs and slash stock market values by a third, Moody’s report said.
“This economic scenario is cataclysmic,” Mark Zandi, Moody’s chief economist, wrote.
The law limiting the amount of money the U.S. can borrow is an anachronism left over from World War One. It requires Congress to authorize additional borrowing by the federal government.
Congress has raised the debt limit 78 times since 1960, most recently in 2017 when Republicans controlled Congress and the White House.
However, Republicans in the Senate now have promised to filibuster the bill to raise the ceiling in protest of president Joe Biden’s proposed $3.5-trillion infrastructure plan, although raising the debt ceiling would address only expenses Congress has authorized previously.
Equity markets have not reacted to the imminent threat, probably because they have become inured to this repeating drama and are confident that Congress will act in time, Zandi said.
In 2013, fears of a default boosted yields on treasury securities, socking taxpayers for an estimated extra $500 billion in interest costs, Moody’s report said.
In the report’s worst-case scenario, the government will default and Congressional gridlock will linger on, delaying $80 billion in payments due 1 November. If the impasse continued, spending would be slashed deeply or delayed indefinitely in every program except national security.
If the worst comes to pass, “Americans would pay for this default for generations as global investors would rightly believe that the federal government’s finances have been politicized and that a time may come when they would not be paid what they are owed when owed it,” Zandi warned. 
TREND FORECAST: Considering the rapidly building U.S. debt level of near $30 trillion, and when interest rates rise the cost of servicing it will also escalate, a debt default will sharply rattle the already weakening equity markets while adding downward pressure on the dollar.
This will in turn push gold and silver prices higher as investors seek safe-haven assets.