- Paul Krugman stated he is “terrified” in regards to the potential penalties of a US debt default.
- On the similar time, the Nobel economist urged he is not frightened about potential motion by credit-rating businesses.
Nobel economist Paul Krugman stated he is “terrified” by the potential fallout from a US debt default – however is not frightened about credit score downgrades.
“Since there’s a variety of buzz about potential ranking businesses downgrading US debt, a reminder about what occurred in 2011. See the massive affect? Neither do I,” Krugman stated in a tweet, accompanied by a chart displaying the yield on 10-year US Treasury bonds all through 2011.
“I am terrified in regards to the potential implications of precise default. However the ranking businesses are simply irrelevant,” he added.
Krugman’s remark comes after scores company Fitch put the US’s credit score on look ahead to a potential downgrade, given Congress has nonetheless not determined whether or not it should increase the debt ceiling – regardless of the chance that the federal government may run out of cash in a matter of days.
Fitch cited political “brinkmanship” over the debt-ceiling standoff as one of many key elements that is placing the US’s AAA credit standing in jeopardy.
“We consider dangers have risen that the debt restrict won’t be raised or suspended earlier than the X-date, and consequently that the federal government may start to overlook funds on a few of its obligations,” Fitch stated in a press release.
Fears of a US debt default have been rising, with Treasury Secretary Janet Yellen warning of grave penalties if policymakers do not act quick.
Krugman has beforehand commented on the debt ceiling, saying the potential of a default may be very actual whereas calling for the ceiling to be outright abolished.