It’s an interesting if somewhat scary prospect to watch the US debate the issue of raising its debt ceiling. On the one hand, rating agencies have warned of downgrading of US sovereign rating.
On the other hand, Congress and the political parties are yet to thrash out an agreement. Meanwhile, US Federal Reserve chairman Ben Bernanke has warned of “calamitous” consequences in case of such a downgrade.
While this appears remote—rating agencies have only “threatened” a downgrade—the question is how reckless the leaders of “indispensable nation” are. The problem has global consequences, but American leaders are concerned only about political points. And even in the face of such a prospect, a deal may not come through: The Economist has derided the Theory of Inevitable Compromise, given the tremendous political polarization there. Keep watching: the end of the fight is yet to come and the results still unpredictable.