A Devastating Portrait Of A US Government Default

In a recent article, Simon Johnson, a former IMF chief economist and senior fellow at the Peterson Institute for International Economics, paints an revealing picture of how he envisions a debt default devastating the US economy.
The portrait is that of a series of ever more destructive dominoes toppling over — with ruined US Treasuries swiftly leading to broken money-market funds and corrupted bank balance sheets — combining to result in an unparalleled run into cash and the evisceration of corporate credit.
From Project Syndicate:

“The reason is simple: a government default would destroy the credit system as we know it. The fundamental benchmark interest rates in modern financial markets are the so-called “risk-free” rates on government bonds. Removing this pillar of the system – or creating a high degree of risk around US Treasuries – would disrupt many private contracts and all kinds of transactions.

Read more: http://www.businessinsider.com/devastating-portrait-of-a-us-government-default-2011-7#ixzz1SrwLAL9T