What If America Defaults on Debt? Interest Rates Would Likely Double

LOS ANGELES, Oct. 16, 2013 /PRNewswire/ -- As the United States nears the Oct. 17 deadline to come up with a solution for handling the $16.7 trillion debt ceiling, the possibility of defaulting becomes a stark reality – a scenario that would have severe repercussions on interest rates and the economy.

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GoBankingRates.com reviewed its interest rate database to project what future rates would be, based on current data, if the U.S. were to surpass its debt ceiling and default. 

Economic Scenario If Debt Defaults

• Standard and Poor's indicated they will devalue America's credit rating to an AA, putting it on par with countries like Qatar and Kuwait.
• Fitch Ratings has officially put the U.S. on a downgrade watch, stating, "Failure by the government to honor interest and/or principal payments on the due date of U.S. Treasury securities would lead Fitch to downgrade the U.S.," in a press release on Tuesday, Oct 15^th.
• Interest rates would likely double due to a combination of inflation and a sharp market reaction. CBS Nightly News recently featured the following interest rate projections by GoBankingRates.com.

Projections: Debt Ceiling Default Effect on Interest Rates

"Why do we have a debt limit? Not to continually raise it," Romina Boccia of the Heritage Foundation told GoBankingRates.com in article titled House Republicans: Heroes or Traitors to the US Economy. "Look at what trajectory the U.S. budget is on — is this sustainable? No," said Boccia.

"What some might call the latest Congressional pissing contest promises to have deep and lasting consequences on our financial lives," said Casey Bond, GoBankingRates.com managing editor. "Interest rates would double, while deposit rates disappear, the stock market crashes, and the dollar devalues. I wasn't there, but it sounds like the 1930s again," she added.

About GoBankingRates.com

GoBankingRates.com (http://www.gobankingrates.com/) is a personal finance website that connects consumers with the best interest rates nationwide. GoBankingRates.com has been featured on several top media outlets, including U.S. News, Yahoo! Finance, and Huffington Post.

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SOURCE GoBankingRates.com