The media’s portrayal of the debt ceiling debate is essentially the same kind of scare mongering that preceded the 2008 Bush bail outs. This time, we are told that the federal government’s credit rating would plummet and interest rates would skyrocket.
But what sense does that make? First of all, maxing out your credit limit is not the same as defaulting on payments. Second, you would think that a borrower’s hiatus (however temporary) from going further into debt would have a positive impact on a credit score.
On a related note, Robert Murphy has a breakdown of Ron Paul’s proposal of wiping out treasury notes held by the Federal Reserve.