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Hopefully, compromise prevails

The current negotiation over the debt limit is critical for the economy. Here's one way of measuring the stakes.

The insight comes from Michael Pond, co-head of interest-rate strategy in New York at Barclays Plc at a conference on the federal debt held by the Center for a Responsible Federal Budget: "If there's no deal, 9% of GDP goes away. That's a double-dip [recession] scenario...What we're particularly concerned about ... is the potential for a fall in the dollar, which then causes rating agency action, which then causes yields and interest rate costs to rise significantly."

Thanks to Pete Davis of Capital Gains and Games for the quote. He was at the conference. (Capital Gains and Games is a terrific site for following the intersection of the Beltway and the economy. The contributors are Gordon Adams, Bruce Bartlett, Stan Collender, Pete Davis, Andrew Samwick and Troy K. Schneider. They know what they're writing about.)

What is going on in Washington? I don't get it at all, not with some 24.6 million people are unemployed, underemployed, and marginally employed, according to the latest figures from the Bureau of Labor Statistics. The risks are too great. Put it this way: If the global financial tremors from Greece on the growing odds it will restructure its debt threaten the global economy imagine what the impact if global investors lose faith in the world's safe haven: U.S. Treasuries would do. Sad to say, Pond may be an optimist.

About the author

Chris Farrell is the economics editor of Marketplace Money.
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