What will happen if the U.S. defaults.

October 17th, Thursday is the debt ceiling deadline for congress. With the government still shut down there is some argument about what will actually happen if or when congress does not reach a consensus.

A couple things will happen when the U.S. doesn't make its deadline on Thursday. Financial shockwaves will run through banks and blow a hole in the economy comparable to the 2008 financial crisis. This will result in a rise in unemployment. The loss of confidence in the U.S. treasury will affect the value of the dollar. Devaluation of our currency will affect many things including interest rates, and mortgage rates.

The markets will go down and investments will dry up. In 2008 the major stock indexes took a 37% hit. After 2008 the U.S. saw its worst recession since the Great depression, it is staggering to think that law makers are willing to create a similar crisis. To prevent a further downward spiral the U.S. treasury pumped 3 trillion dollars into the financial system and provided 300 billion in fresh capital to the nations banks. The 2008 crisis was caused by a private financial institution no where near the size of the U.S. government, the scale of the crisis if the U.S. defaults would be much larger.