July 18, 2011 at 06:00 AM EDT
The Painful Consequences of a Debt Ceiling Increase
Failure to reach a compromise on a U.S. debt ceiling increase could result in an unmitigated economic disaster - one so unprecedented government and private analysts can't even accurately pinpoint all the potential consequences. To avert this crisis, U.S. President Barack Obama wants a debt ceiling increase of $2 trillion, which analysts say would carry the country through the end of 2012. The president has moved the deadline for reaching an agreement up to July 22. President Obama said the time cushion was needed to prevent a last-minute panic by the financial and debt markets that could "potentially create another recession" - panicking investors and possibly causing an economic meltdown even worse than the one in 2008. But even after a debt ceiling increase is approved - though it would obviously produce a brief sigh of collective fiscal relief - the U.S. economy and markets will suffer painful effects, and almost no longer-term positive impact. So what can investors expect once the U.S. debt limit is, in fact, raised? Click here to continue reading...
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