So, what are they expecting if we don't raise the debt ceiling? That we will just fund the Government through inflation? I cannot say that I will not incidentally benefit from that.
I think the idea would be that they would keep disbursements from the Fiscal Service going based on whatever cash reserves they have and whatever revenues keep coming in.
Then, they would stop all automatic payments on other items. They would try to figure out what they could afford to pay, while maintaining cash reserves to pay for debt service. Unfortunately, this may not be legal and would put the US into a recession immediately. The other problem is that a financial panic caused by this situation could cause credit markets to freeze. This could put the economy into free-fall state and assuming there is still inaction from Congress, this would lead to the collapse of the capital markets and the insolvency of all commercial banks. That would be something like the Great Depression
3. Some Tea Party people would love that though because their freeze dried food, gold and automatic weapons will come in handy.
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