Most in South Carolina haven’t felt impacts of the government shutdown but a local economist says everyone will feel a debt default.
“It would cause people worldwide to feel the difference in how their economy is doing because the dollar and dollar debt is fundamental to the operation of the world economy,” says Dean Emeritus, Bruce Yandle with Clemson’s College of Business and Behavioral Science.
Yandle explains a government default is similar to a family no longer able to pay their house payments and having to give their keys back to the bank.
“A default is serious business,” Yandle says.
According to Yandle, a default can mean high volatility in interest rates and security prices, possible shutdown of mortgage lending, and if it continues for a week or more, dramatic cuts in federal operating budgets, with associated layoffs and reductions in government programs. This can affect everything from student loans to food inspection.
Yandle also says combined with a government shutdown it could send the economy back into a recession. However, he believes a default won’t happen and if it does, it will be brief.