Posted by WARREN MOSLER on July 23rd, 2011
If Congress does get a bill to extend the debt ceiling to the President, he will sign it.
The US economy will continue to muddle through, with an extended soft spot and modest growth.
If Congress doesn’t get a bill to the President,
And if the US Treasury goes cold turkey to a balanced budget,
spending only as revenues accrue,
I forecast the following consequences:
Interest rates on US Treasury securities will fall, and not rise.
The US unemployment rate will move geometrically towards 100% until US Treasury deficit spending resumes.