Economic and Political Fallouts from Debt Debacles

Episode Details

The UK’s budget crisis last September led to a plunge in the value of the pound, the sacking of the Chancellor of the Exchequer after 39 days in office, and a vote of no confidence against the Prime Minister. These events highlight how fiscal policies can have wide-spread political and economic consequences.

As the U.S. Congress fails to raise the debt ceiling in a timely manner, what lessons might U.S. policy-makers draw from the British experience? How does failure to raise the debt ceiling affect faith in U.S. Treasury debt? And what are the rammifications of eroding trust in U.S. debt? Adam Posen joins EconoFact Chats to discuss these issues.

Adam is the President of the Peterson Institute for International Economics. He served seven terms as an advisor to the U.S. Congressional Budget Office, and a three-year term on the Bank of England’s Monetary Policy Committee.