Yeah, I know that #hackgate is important and interesting, but actually it’s very small beer compared to the looming catastrophe of a US debt default. Here’s Will Hutton’s take on it.

When President Obama, the supreme rationalist, says that there are just days to avert Armageddon, everyone should sit up and listen. For months, Republicans have used their new majority in the House of Representatives to block any move to lift the artificial cap on the amount the US government can borrow. If by this Friday they still refuse – insisting on up to $4trillion of spending cuts, excluding defence, and no tax increases as the price of their support – then the US will be unable to service its public debts. The biggest economy on Earth will default.

The results will be catastrophic, argues JP Morgan chief executive Jamie Dimon – a warning repeated by Obama. The US government will have to start to wind down: soldiers’ wages and public pensions alike will be suspended. But in the financial markets there will be mayhem. Interest rates will shoot up and there will be a flight from the dollar. Banks, uncertain about their expected income from their holdings of US Treasury bonds and bills, will call in their loans, creating a second credit crunch. Some may collapse. Even to get days away from such a prospect, says Obama, will now have costs: every creditor to the US has been shaken to the core by American politicians not taking their responsibilities as borrowers seriously. They will exact a higher price for lending in future, even if a bargain is struck now.

The prospect of a US default in early August is so apocalyptic that many people cannot believe that such a thing will happen. What they haven’t reckoned with is a Republican party in Congress manned by people who make Islamic fundamentalists look like Spinoza.

If the US defaults, we’re all screwed. Period.

See also: “Voodoo Economics Rules OK”