One Man’s Opinion: Is It Likely The US Will Default On Its Obligations?

92835431It’s increasingly likely the current deadlock over the so-called “Obamacare” will be tied to the ensuing debt-ceiling battle and the two issues most likely would be merged from a negotiation and outcome point of view, said Roger Altman, chairman of investment bank Evercore Partners Inc and a former US deputy Treasury secretary.

The big framework however, is that the US is not likely to see more than a passing impact on the economy or on financial markets. If one steps back and studies what’s happened in the past in comparable situations, one would see there’s been only a slight interim impact on the economy, which’s been quickly made up. And the same is true with financial markets.

So, there’s nothing historically to suggest that however ugly, noisy and frustrating this current situation is, there will be any permanently lost output or there will be any permanently lost growth, incomes or asset values, Roger noted.

Asked if he still believes the economy is on track despite what’s been going on in Washington, Roger said he doesn’t think there’s any chance the US is going to default in any real sense of that term.

There are already reports that John Boehner would pass a debt-limit increase on a bi-partisan basis, and if necessary with the help of majority Democratic votes in order to avoid a default.

That’s a very strong signal and that’s likely to be an accurate report. So the chances of a default are not high at all. The economy is likely to grow by 3 percent in 2014 as the real GDP side remains intact.

However, there is still some small chance that the scenario gets much worse, but that probability remains small, he concluded.

You can watch the video here.

 

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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