October 17 2013

This is the date of the potential U.S. default on its sovereign debt. If it occurs it will be blamed on a small section of the US Congress within the Republican Party referred to as the "Tea Party". It would be a catastrophe for the banking sector, the global financial system, and the indebted everywhere. Interest rates would likely rise dramatically in the space of a week. People exposed to large mortgages could be forced out of their homes in many cases. A social divide would develop between the cashed up and the indebted. Entire sectors of the banking industry could disappear. Oddly enough it could, in the medium term, turn out well for the U.S. It could prevent further indebtedness, lower the US dollar, force the US to rebuild its manufacturing base and restore its competitiveness. Whilst definately not in my personal interest, I realise in the medium term it could work out very well for the U.S. I suspect that the short term cost will be so high that any political party that did this to their own nation would end up paying a heavy price for at least a generation. However the Tea Party are a protest movement and not a political movement, as such, it is well within their mental space to embrace actions that would take the U.S. to a default. If it happens I suspect this Great Recession will well and truly feel like a Depression. It is now possible that U.S. Congressmen will do what the U.S. creditors are not prepared to do, call the bluff on the American Insolvency.