Dean Baker: Debt Default: The Only Way to Get to Full Employment?

All the usual suspects are giving us all the usual warnings about the disaster that would ensue if the government defaults on its debt. Much of what they say is undoubtedly true; it would create a huge amount of fear and uncertainty in financial markets.

 

Look for stock and bond prices to tumble and interest rates to soar. The viability of many banks and other financial institutions may be called into question if even government debt cannot be viewed as entirely safe and highly liquid asset. This is not the sort of thing that an economy still struggling to recover from the recession needs right now.