MidnightWatcher – Prophecy in Motion

By Kristina Cooke and Tim Ahmann – “PHILADELPHIA — The U.S. Federal Reserve is actively preparing for the possibility that the United States could default as a deadline for raising the government’s US$14.3-trillion borrowing limit looms, a top Fed policymaker said on Wednesday.

Philadelphia Federal Reserve Bank President Charles Plosser said the Fed has for the past few months been working closely with Treasury, ironing out what to do if the world’s biggest economy runs out of cash on August 2.

‘We are in contingency planning mode,’ Plosser told Reuters in an interview at the regional central bank’s headquarters in Philadelphia. ‘We are all engaged … It’s a very active process.’

Plosser said his ‘gut feeling’ was that President Barack Obama and Congress will come to an agreement to increase the Treasury’s borrowing authority in time to avert a default on government obligations.” Read more.

Carney warns U.S. default would have ‘profound implications’ – “The governor of the Bank of Canada, Mark Carney, says a U.S. government default on its debt would have “profound implications” for financial markets and that ‘it’s our view that’s not something that should be tested.’ Carney said Wednesday the bank does not expect the U.S. will default, but that there’s no certainty about what the effects would be if it did.” Read more.