Stocks may fall 30% if U.S. defaults -- bank report

[steve2470]

http://money.cnn.com/2011/07/28/markets/default_stocks_gdp/index.htm?iid=Popular

NEW YORK (CNNMoney) -- In the dubious scenario that lawmakers fail raise the debt ceiling and ultimately lead the country to default on its payments for the first time in history, U.S. stocks could tumble 30% over the following six months to a year, according to a Credit Suisse report.

While stocks have been sliding and investors remain on edge, Credit Suisse analysts think a default scenario has less than a 1% chance of actually playing out.

But if there is a default, the U.S. economy could contract a total of 5% during the next six months to a year as well, said Luca Paolini, a research analyst at the Swiss investment bank and an author of the research report.

"If the U.S. does default, there are massive ramifications," Credit Suisse analysts said in the report. "The fallout would be far worse than after Lehman's default. Back then, the U.S. government could at least spend and do the 'right thing," while now the only backstop would be the Fed."

[ruggerson]

1. We have enough funds to pay the debt service on our bonds

so how can we "default"?

[gateley]

4. For how long? nt

[ruggerson]

8. if we make it the #1 priority

presumably a long time, as our revenues on a monthly basis bring in far more than is required to service our debt.

[gateley]

12. But not enough to cover the other payments? nt

[Amonester]

2. Great. JIT for the Riches to make another killing, sell high, buy low

as they fudging $ay. :grr:

[snagglepuss]

3. Yet the Chamber of Commerce hasn't pulled the baggers on the carpet.

It is clear that a defalut would be disasterous yet business hasn't put the screws to the repukes. Am I missing something?

[neverforget]

15. I think they have it's just that the monster they created isn't listening

[tex-wyo-dem]

19. I have a hard time believing the monied corporate oligarchy would stand for this...

They have a LOT to lose if the U.S. goes into default, not just here, but world-wide. The only way they would be banking on this is if they had massive shorts on the default, and I think the markets would have noticed this by now, so not very likely.

Me thinks the teaparty is going to get smacked hard, and soon.

[snagglepuss]

20. This massive uncertainly can't be good for brand America. Is it possible

that the baggers have given private assurances that at the last minute they'll cave if the Democrats haven't?

[freshwest]

5. GOP - Good for poverty - Prosperity - Not so much

[gateley]

6. They haven't seemed overly concerned thus far, have they? Wonder

what will happen on Monday if they're still futzing around. Monday is August 1!!

[flamingdem]

7. It will be a buying opportunity and the rich will get richer ... nt

[banned from Kos]

9. Worse is the 5% GDP contraction CS forecasts - that is q4 2008

all over again.

[sarcasmo]

10. If 56 million in social security checks don't go out in August

The economy will tank, the market will tank and hundreds of thousands will be homeless. It will make the last Depression look tame.

[MadMaddie]

11. Hey Michelle Bachman says that's just a bunch of hooey

it's no big deal. Bachman's political aspirations will go down the tubes if the Debt Ceiling is not raised. That would be the only good outcome of the disaster.

[ThoughtCriminal]

13. I don't think it will take 6 mo to a year to fall that far.

I fear that's what the first month will look like.

[Horse with no Name]

14. I care more about what MAIN St. loses than I do about Wall St. loses

and if keeping Wall Street afloat means dead bodies lying on Main Street due to lack of healthcare and food...then let Wall Street fall.

Seriously.

[frazzled]

18. Main Street will lose in such a scenario

People's retirement savings, whether they like it or not, are tied up in the stock market, whether it's a teacher's or electrical worker's pension or an individual's work-related 401(k). For those at or near retirement, it could mean disaster.

[Dawson Leery]

16. If you have any retirement investments roll them into cash or money market.

[AndyTiedye]

17. Eric "Ultrashort" Cantor Will be Laughing All the Way to the Bank

It's the perfect scam. Bet that the economy will crash, and MAKE IT HAPPEN!

A bit like those people who heard what was going down before 9/11 and bought "put" options on the airlines.

[lonestarlib]

21. Default automatically accomplishes what baggers want--

massive reduction in spending, gutting of social programs, & smaller government.

Everyone seems to have forgotten that it's not just us--PIIGS are on verge of default, too. Some pundits are worried about "perfect storm".