Default by the US will make interesting case studies for all the econ/business folks. At first, markets will try to determine where the next information edge will emerge from any default/recovery trading or any almost default action. Secondly however, world economic confidence in US governance and its ability to grow a recovery will slow things a bit.
You have to admire the Republicans, which is always hard to do, but at least they playing the risk side edge to the max in order to place everyone in a game of political chicken. Now the game of chicken in game theory would not just be who blinks first, but also who loses the least when no one blinks and a true collision occurs. The Republicans obviously figure they will lose the least in a default although that runs against what news talk folks are saying. But they are probably right. Since the worst possible outcome in this game is default, the least worst, if you will, is for the party not in the White House. Voters will remember the event as a leadership issue which is why the president is working so hard to avoid the default. Fair or unfair, when you are at the top, they blame you.
Forget what Geithner and everyone else is saying about the default. Everyone will line up to get paid a bit later. If we have learned anything is the last few years, the power folks always get paid and everyone else feeds on watered down economic opportunities.
