An interesting take from TPM Reader SC:
The parallels between what may happen if and when we go into default and the premise of the Y2K “crises” are striking; only we may not be able to fix this one.
The parallels are based on the premise that the Y2K issue was the result of a relatively trivial component element of a wide array of computer functions. It was built on an assumption that a date/time function which began with the digit “1” was a constant (or a variation on that theme). The critical element was a foundational component, so integral as to be invisible, even unthought of, but was revealed to be a critical component in many, many processes. It did not matter whether you liked the 20th century, or even the Gregorian calendar; but rather that we built it into the fabric.
So, too, with the core concept that debt owed to the US Government represents “pure” money-value. In general, the cost of money is made up of three basic factors: risk, time-value of money, and transaction cost. But the foundational belief that debt to the government has zero risk allows a factor to be dropped out, leaving only time-value and transactional cost.
As a result, the “zero” risk factor is built into a wide array of financial instruments, contracts and other agreements. Again, in most cases (like the clock on your microwave in 1999), the important thing is not the risk-zero equation, but the bigger function (the contract, or financial instrument). But if suddenly the risk-zero factor stops working (because the US defaults, and there is no risk-zero baseline), the working premise — and in some cases, the functionality — of the instrument or contract is put at risk.
In most, perhaps nearly all, cases, the problem is remediable (just like resetting your microwave). But like Y2K, the problem will be finding all of the instruments that have risk-zero built in; and figuring out how to amend them. But, like Y2K, the sheer number of places where the dangerous equation could be hidden is enormous, and the costs and implications of finding and fixing them is tremendous. Will your mortgage escrow change? Or the municipal bonds be altered? Who knows? And it will take an army of lawyers to find out.
The costs to society and commerce could be huge, and may dwarf even the higher borrowing costs to the government that could result.