Poll analysis

10/11/2013

Governments traditionally have two policy levers to influence the economy: monetary policy and fiscal policy. Many investors have directed their ire at the unprecedented monetary easing of global central bankers over the last several years, but fiscal policy in both Europe and the U.S. has proven impotent because of unswerving gridlock. Now there is a potential reckoning for fiscal impotency in the form of a fixed debt ceiling in the U.S. Unless the limit on debt issuance is raised soon, the country may experience its first ever intentional debt default. We asked readers, "Will a technical default on U.S. government debt do long-term damage to the global economy?" 67% of 911 respondents said yes. The specific effects that might result from a technical default are highly uncertain, but they would likely include: an increase in borrowing costs, a decline in the U.S. dollar and a decline in global GDP; all large and consequential. -- Jason A. Voss, CFA, Content Director, CFA Institute

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