There are a few scenarios. A couple are described by here by Carney and Morici. Yes, there are some legal issues, but nothing appears set in stone, and Geithner has made his career twisting laws so that the Fed and the Treasury could do what they need to do to keep the game going. http://www.cnbc.com/id/43899646 Now Carney writes for entertainment purposes, but I've seen the exact same scenario laid out in more academic fashion elsewhere. This was just the first link I happened on. The bottom line is this deadline is a made-up crisis. Why the Bammer and Geithner have played this game of chicken is a political matter I can't get my head around. Maybe some of his critics are right and BO is another Herbert Hoover. In the meantime, we remain in one of the most balls to the wall bull markets ever. Why are people's panties in such a bunch? A downgrade by the moronic ratings agencies would be meaningless other than providing a nice buying opportunity. If anything is going to derail it, it's going to be a crack-up of the insanity in China or Italy/Spain falling apart, not what whether there is some stupid, kick-the-can meaningless fucking deal between the Bammer and the Boner this month (remember Gramm-Rudman? how'd that one work out!!!)
I find it quite unlikely the Fed would agree with this, handling the control of the money supply to the UST at a time where M2 is soaring. This type of move could get iexpectations to unanchor big time If they were to do this, essentially congress wouldn't have a strong reason to approve a debt ceiling hike and the amount of new money created by the UST would be quite large overtime
That's possible, but the Fed - especially under Bernanke - gave up its independence long ago. Can't put that genie back in the bottle. Time for the Fed, Geithner, and the Bammer to lie in the beds that they've made.
Bernanke has actually explicitly stated that he's not going to do anything to assist in the resolution of this, hasn't he?
Look at Euro CHF... Also, it offers a nice view on the claim that weak currencies are good for an economy. Let's see where the Swiss are 5 years from now.
Swiss banks' earnings reports were horrid. They're laying off workers. Swiss about to say "uncle" and soon. (Aussies too).