US Debt Default Would Have Global Impact

LONDON — With the U.S. government shutdown in its second week and the possibility of an American debt default next week, the global economy is beginning to feel the effects.

The action, or lack of action, on the U.S. government’s funding crisis is in Washington, but concern about it spans the globe.  One financial market indicator known as the "fear index" jumped 15% on Monday alone.

But while the headlines look ominous, London-basedWall Street Journal reporter Charles Forelle noted that global markets have so far not had the strong negative reaction some had expected.

“If there’s an apocalypse on the horizon, the financial markets don’t see it coming,” he said.

Global markets have been drifting lower, but have not fallen dramatically.  Still, Forelle warned the enthusiasm over investing will change dramatically if the shutdown continues, and especially if the U.S. government defaults on its debt.

“The other longer, bigger scale issue is the destruction of confidence in the U.S. government and in U.S. treasuries [securities].  And that’s a much more difficult thing both to measure and to fix,” Forelle said.


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