ADVERTISEMENT
What Would a Federal Debt Default Mean to Manufacturers?08-04-11 | News

What Would a Federal Debt Default Mean to Manufacturers?




img
 

Default could sabotage manufacturing's tenuous recovery -- depending on how long it lasts.


As lawmakers in Washington scramble to avoid a debt default, manufacturers are left wondering, how it would affect them.

If the federal government defaulted on its debt, would it indeed be the major crisis that Federal Reserve Board Chairman Ben Bernanke described earlier this month, or would it be similar to Y2K -- much ado about nothing?

An extended debt default not only might sabotage the manufacturing sector's recovery. It could propel the U.S. economy right back into a recession, as it would breed uncertainty. Uncertainty always breeds contraction within the general economy, and so certainly the manufacturing sector wouldn't be excluded from that.

U.S. manufacturers also would find themselves in an even deeper hole as they try to compete with low-cost countries. Many companies would move operations abroad to avoid interest-rate rises and possibly to explore stronger market segments.

– Courtesy of Industry Week, Josh Cable

img