US Default’s effects

US Default would likely cause Stocks, Bonds, Dollar to collapse – Matthew Craft, HuffPost

There is wide agreement among economists that a default would drive up borrowing costs for everybody. US Treasury yields act like a floor for other lending rates, so raising them makes it more expensive for Americans to take out mortgages, for corporations to finance new spending and for local governments to borrow.

But analysts say predicting exactly how a default would play out in stocks, bonds and currency in the hours and days following the Aug 2 debt ceiling deadline is practically impossible.

Traders are still banking on a deal to increase the borrowing limit before the Aug 2 deadline. That’s one reason stocks and bonds have remained relatively stable thus far, even after Moody’s and Standard & Poor’s warned they may soon take away the country’s top credit rating.