Hard to trust the US and its debt ceiling theatre of the absurd
If the US were less divided, the debt ceiling would not matter. In today’s divided US, it does. So long as these divisions continue, so will the threat of a default.
How is one to assess the possibility of a voluntary default by the world’s most important country? Is something as mad as this really likely to happen? What might be the consequences if it did?
These questions are impossible to answer. This is not because it is a “black swan” – that is, unimaginable. A US default falls instead into a broad category of “known unknowns”, that is unforecastable, high-impact events. The financial crisis of 2007-09, the pandemic and Russia’s invasion of Ukraine were of this kind.
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Financial Times
Martin Wolf is chief economics commentator at the Financial Times, London. He was awarded the Commander of the British Empire in 2000 “for services to financial journalism”.
