Brace yourself for higher borrowing costs. Assistant Labor Secretary William Spriggs believes “Congress will provide a resolution the President can sign” but stresses that the “needless haggling and political posturing by the House GOP on the full faith and credit of the United States does not help the image of the United States.” The former member of the BE Board of Economists, however, offered the following thoughts on fallout in the event of default or downgrade: The impact will be catastrophic, because demand for the dollar is supported by demand for US Treasury notes–held by the world as the current “gold†standard because they are viewed as solid investments the world over. So, not only will the cost of borrowing go up for everyone in the US, the price of everything will go up as the value of the dollar falls.
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