Related story: Here's how the US economy and the stock market could react to the 4 possible outcomes of the debt ceiling standoff.

Barrons: Donald Trump Says Republicans Should Let the U.S. Default. What Would Happen Next.
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From stocks to bonds and beyond, there is little in the financial system that the U.S. debt ceiling doesn’t affect. A lack of a resolution before the June 1 deadline could be catastrophic, likely bringing a stoppage of government benefits to retirees and veterans—and potentially a recession and other woes down the line.

While former President Donald Trump this week said Republicans should let the U.S. default if they don’t get the spending cuts they want, markets are still largely shrugging off this doomsday scenario.

Perhaps that is because the repercussions would be so dire. In other words, investors still appear to trust that even the most obstinate politicians’ brinkmanship wouldn’t dare to fling the economy over that brink. Then there’s the fact that familiarity breeds complacency. Now that the U.S. has stared into the abyss of default in the past, the Treasury Department’s “extraordinary measures” to stave off disaster seem more commonplace.

Economists are turning to past scenarios to game out how this latest standoff could go.

History shows that even if we do finally get an agreement before the June 1 deadline, the showdown will have repercussions and result in slower economic growth, Veneta Dimitrova, senior U.S. economist at Ned Davis Research, wrote on Tuesday.

As many investors will recall, the U.S. came perilously close to default in 2011. Though the world’s largest economy avoided it, Standard & Poor’s still downgraded the U.S. government’s credit, increasing the cost of borrowing for trillions of national debt.

The S&P 500 (stock market index tracking the stock performance of 500 of the largest companies) sank some 20% from April to October that year ... while the dollar index fell and gold jumped.
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