'It depends on how close to the brink we go': Stock market turmoil likely if U.S. teeters toward a default, analysts say

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While a U.S. default seems unlikely, strategists say there would be no 'shelter' for investors if Congress can't reach a debt-ceiling agreement in a few months.

Congress might only have until this summer to strike a deal to lift or suspend the U.S. government debt ceiling, prompting analysts to warn of growing risks to global financial markets as America moves closer to a potential default.

The Congressional Budget Office on Wednesday estimated that the U.S. government could reach its debt limit sometime between July and September. For those reasons, financial markets tend to wave off the possibility of a U.S. default as unthinkable, and instead “rely on the fact that historically, while recalcitrant, Congress has raised the debt limit,” Reganti said.

A look at the 2011 debt-ceiling standoff shows riskier assets sold off , with the S&P 500 index SPX tumbling about 15% from July to September, but gold GC00 , U.S. Treasurys and highly rated corporate bonds benefited from “safe haven” demand.

 

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Why shouldn't we suspend the debt ceiling permanently?

The Toddlers have proven their foolishness, so let's let them continue.

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