Welcoming a US default

Financial markets have not quite priced in a US debt default scenario for two reasons: it is considered extremely unlikely. A “Hollywood” or “Bollywood” type last-minute happy ending is still expected. The second reason is that it is intellectually a daunting exercise to grapple with the consequences of the default. A default would greatly erode whatever prestige and influence the US still has. It is unlikely that the US dollar would rise due to “safe-haven” inflows. It is common sense that when a country defaults, it is much farther from being safe.

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